Risk Assessment and Critical Factor
Identification for Readiness and
Cost Trade-off Analysis
Naval
Postgraduate
School
Readiness and Cost are…
• Important criteria for the acquisition and
sustainment of major weapon systems like the
Joint Light Tactical Vehicle (JLTV)
• Often in conflict: to increase readiness, one
typically must increase cost
• Difficult to project: problem complexity, myriad
factors/sources of uncertainty, issues with
timing, availability of data
Enhanced JLTV Prototype Life Cycle Cost and Readiness
Model (Excel-based Management Decision-Support Tool)
Oshkosh JLTV
Lockheed Martin JLTV
AM General JLTV
Life Cycle Cost (LCC) and Readiness
Critical Factor Identification
• Incorporating experimental design, we created a
macro-enabled, nearly orthogonal Latin
hypercube designed experiment to test 21 model
factors to determine the subset of factors that
contribute most to cost and readiness performance
parameters
Partition Tree to Identify Critical Factors of the Readiness
Performance Parameter of the Wartime Fleet
• We conducted statistical analysis of the
experiment results and created partition trees of
each performance parameter to determine critical
factors by the “splits” and “leaves”
Risk Assessment of Scenario-Based Investment Trade-off Decisions
• Investment decisions are not solely determined by the average ROI (in the
JLTV program case, average LCC and average fleet readiness), but also by
the amount of risk inherent in the investment
• We develop Monte Carlo simulations of scenario-based investment
decisions in order to quantify the Budget Risk (probability of exceeding a
set cost threshold) and Readiness Risk (probability of falling below a set
readiness percentage) associated with each investment to better inform
defense trade-off decisions
• This methodology aids creates value by identifying those investments that
reduce risk while delivering low cost and high readiness
Histogram of Results for
LCC; Budget Risk
(Probability of Exceeding
the Cost Threshold) is
Quantified in Blue
Model-Based “What-if” Analyses Can Help…
• Compare selected alternatives
• Find robust solutions
• Quantify impacts of uncertainty (e.g., risk of
exceeding budget by >10%, risk of Ao < 80%)
• Explore how changes in key factors (decision variables
impacted through investment) affect both LCC and
Readiness. EX: Huge potential cost savings from Idle
Time reduction (over $40M); high readiness achievable
at varying cost points
Capt Emmaline Hill, USMC, GSBPP
CAPT Nicole Simoncini, USA, GSBPP
Funded by Marine Corps Intelligence
Faculty Advisors:
Prof. Keebom Kang, GSBPP
Prof. Susan M. Sanchez, OR/SEED