Cost overruns within the Department of Defense (DoD) acquisitions are widespread and have come to be accepted by program managers as a daunting challenge. A study of 35 major defense acquisition programs has identified requirement changes and unit quantity changes as the two main decision factors contributing to cost growth. Similarly, some of the factors cited in Selected Acquisition Reports as being responsible for significant cost overruns are requirement changes and unit quantity changes. This dissertation focuses on these two factors and investigates the dynamic relationship they have with program acquisition cost. Currently, there are no proven methods to assist program managers with dynamically evaluating the long-term effects of requirement changes and unit quantity changes. Understanding the long-term effects of these changes will help support decision making, strategic resource planning, and investment forecasting. In addition to helping program managers understand the effect of these changes, there is a need to identify their unintended consequences.We present a methodology for understanding the dynamic relationship between the variables of requirement changes, unit quantity changes, and cost of major programs. A system dynamics approach is taken to understand the long-term effects of requirement changes and unit quantity changes on acquisition cost. The proposed methodology introduces the Balance Model based on system dynamics principles to clarify the interplay between variables and provide detailed insight into their effect on program cost. This insight provides program managers with proactive decision opportunities for avoiding cost overrun during DoD acquisition life cycles.
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