Estimating Costs using Guidelines in the U.S. Air Force’s “Cost Risk and Uncertainty Analysis Handbook”

In its 2007 Cost Risk and Uncertainty Analysis Handbook, the U.S. Air Force describes in great detail its methodology for estimating the total cost of a given system. This methodology is applied to a potential (but fictitious) missile system.

Here, we have a series of 3 example models which use @RISK to build increasingly sophisticated models according to the guildelines of the handbook.

Air Force Missile Cost 0 – Deterministic Model
The handbook stresses the importance of first developing a deterministic model, based on point estimates.

Air Force Missile Cost 1 – Basic @RISK Model
This Basic @RISK Model builds upon the previous deterministic model by incorporating uncertainty according to the guildelines in the Air Force handbook.

Air Force Missile Cost 2 – Correlated Model
This model builds upon the previous model by incorporating explicit correlations between selected inputs, again according to the guildelines in the Air Force handbook.

» Example Models
» Download a trial version of @RISK

 

 

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