Are 80 percent of lifecycle costs predestined by PDR?

One of the potential pitfalls of the rapid prototyping path could be the neglect of production and sustainment costs in the effort to ensure that the product reaches residual operational capability within the 5-year window dictated by Congress.

 

Studies have shown that, by the time the Preliminary Design Review is conducted, approximately 80 percent of the program’s life-cycle cost (LCC) is determined, even though only a small percentage of the program’s cumulative costs has been spent. This early design work is the place where the team has the best opportunity to impact LCC. By the time of the Critical Design Review, the LCC commitment is approximately 90 percent.

 

Production, logistics, and other considerations must be exhaustively understood and prioritized early or your program could easily become unaffordable. Prototyping emphasizes an experimental philosophy in order to get innovative technology to work. Without a strong program manager emphasis, there is little incentive to focus on future LCC drivers—i.e., production, operations, and support.

That was a nice article from David Riel over at DAU, “Today’s Complexities Demand More Chefs, Fewer Cooks!” Read the whole thing to get caught up with 5000.02 pathways.

This point, that 80 percent of lifecycle costs are determined by PDR, has been cited since at least the 1970s. Of course this doesn’t apply to software projects, which are emphasize a minimally viable product and continuous delivery of improvements. This is why the Defense Innovation Board argued for a new “color of money” that doesn’t distinguish between RDT&E and O&M.

But the certainty that 80 percent of the lifecycle is determined at PDR seems strange, as though design changes and business techniques cannot drive costs down further. When Armen Alchian used actual cost data on World War II aircraft production, the resulting models still produced 25 percent error on average — and that was predicting the past! So it’s hard to believe a multi-decade program has costs baked in before full-scale development really encounters the real world. Earnest Fitzgerald called this thinking “Cost Calvanism” because people believe that costs are predestined, making them less action oriented to go make tradeoffs.