Military Cost-Benefit Analysis

Francois Melese is Professor of Economics at the Defense Resources Management Institute (DRMI) in the Graduate School of Business and Public Policy at the Naval Postgraduate School, USA.Anke Richter is Professor of Operations Research at the Defense Resources Management Institute (DRMI) in the Graduate School of Business and Public Policy at the Naval Postgraduate School, USA.Binyam Solomon is a Senior Scientist with Defence Research and Development Canada.

This is a thorough, timely and up-to-date treatment of cost-benefit analysis in the defence environment. Its analysis should be helpful to all those potentially and actually involved not only in weapons system acquisition but in public procurement more broadly.Peter Hall, Emeritus Professor, School of Business, University of New South Wales, Canberra.At a time when government budgets and public sector procurement are under immense pressure globally, it is imperative that practitioners and students alike fully understand the appropriate techniques available to properly evaluate such procurement in the interests of effective decision-making. This book makes a unique contribution in this regard providing, for the first time, an accessible handbook designed to meet this objective which focuses on the military sector where some of the most difficult decisions are currently having to be made. Both students and practitioners in the military sector will find this book essential reading and the ideas contained here will also resonate with those working in or studying other parts of the public sector.Professor Derek Braddon, Emeritus Professor of Economics University of the West of England, Bristol, UK.

• I. Introduction and Problem Formulation 1. Introduction - Military Cost-Benefit Analysis (CBA): Theory & Practice 2. Allocating National Security Resources 3. Measuring Defense Output: An Economics Perspective 4. The Economic Evaluation of Alternatives (EEoA) II. Measuring Costs and Future Funding 5. Cost Analysis 6. Advances in Cost Estimating : A Demonstration of Advanced Machine Leaning Techniques for Cost Estimation 7. Facing Future Funding Realities: Forecasting Budgets beyond the FYDP III. Measuring Effectiveness 8. Multiple Objective Decision-Making 9. A New Approach to Evaluate Safety and Force Protection Investments: Tradeoffs between Money Spent and Lives Saved IV. New Approaches to Military Cost-Benefit Analysis 10. The Role of Cost-Effectiveness Analysis in Allocating Defense Resources 11. A Risk-Based Approach to Cost-Benefit Analysis: Strategic Real Options, Monte Carlo Simulation, Knowledge Value Added, and Portfolio Optimization 12. Extensions of the Greenfield-Persselin Optimal Fleet Replacement Model: Applications to the Canadian Forces CP-140A Arcturus Fleet V. Selected Applications 13. Embedding Affordability Assessments in Military Cost-Benefit Analysis: Defense Modernization in Bulgaria 14. Real Options in Military Acquisition: A Retrospective Case Study of the Javelin Anti-tank Missile System 15. An Application of Military Cost-Benefit Analysis in a Major Defense Acquisition: The C-17 Transport Aircraft 16. Cost-Effectiveness Analysis of Autonomous Aerial Platforms and Communications Payloads 17. Time Discounting in Military Cost-Benefit Analysis (CBA)