Bending the Cost Curve: Moving the Focus from Macro-level to Micro-level Cost Trends with Cluster Analysis

Abstract

“Bending the cost curve” has become the ambiguous jargon employed in recent years to emphasize the notion of changing unwanted cost trends. In response to the planned $1 trillion Department of Defense budget reduction over the next six years, the Air Force has launched its own Bending the Cost Curve initiative in an effort to reduce cost growth. A principal concern with Bending the Cost Curve initiatives and research to date is the central focus on aggregate cost trajectories which can obscure the true underlying growth curves which require attention. In response, the authors apply a novel growth curve clustering approach to identify underlying cost curve behavior across the Air Force enterprise. They find that micro-level growth curves vary greatly from the aggregate cost curves. Furthermore, they illustrate how this approach can help decision-makers to direct their focus, proposals, and policy actions toward specific growth curves that must be “bent.”