Cost and effectiveness integration

Abstract

One of the most difficult problems in a Cost and Operational Effectiveness Analysis (COEA) is the combination of the cost and effectiveness data and the corresponding presentation of this information to the decision maker in an integrated manner that allows him/her to select the best alternative from the competing weapons systems. The combination of cost and effectiveness is necessary because the wartime field commander wants to maximize weapon system effectiveness regardless of fiscal costs, while the peacetime financial manager wants to minimize costs while providing acceptable weapon system effectiveness. The difficulty of combining cost and effectiveness arises because the operational effectiveness analysis usually presents the performance of each alternative with respect to several measures of effectiveness (MOE). When examining this data, it is unusual to have a clear winner among the competing alternatives. And when the cost data is considered with the effectiveness data, the problem of selecting the "best" alternative is further complicated. However, unless the COEA is able to integrate the cost and effectiveness data into a coherent product, the analysis has not helped the decision maker solve his/her problem-selecting the preferred alternative. There are several potential methods that can be used to integrate the cost and effectiveness data for presentation to decision makers. This paper briefly discusses each method, provides an example of each method, and identifies its associated advantages and disadvantages.<>