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DCCUMENT FESUME
04934 - [B0345216]
A Range of Cost Measuring Risk and Uncertainty il- Major
Programs: An Aid to Decisionmaking. PSAD-78-12; b-163058.
February 2, 1978. 17 pp. + 2 appendices (5 pp.).
Report tc the Congress; by Elmer B,, Staats, Ccwtrcller General.
Issue Area: Federal Procurement of Goods and Sei vices (19001.
Contact: Procurement and Systems Acquisition Di.,.
Eudqet Fanction: National Defense (050); Notionial Deiense:
Weapon Systems (0C57).
Organization Concerned: Department ot Defense; Department of the
Army; Department of the Air Force; Department of the Navy.
Conqressional Relevance: House Coomittee on Armed Services;
Senate Committee on Armed Services; Congress.
Authority: OMB Circular A-109.
Historically, major Federal programs and brcjects have
experien,-ed substantial cost growth. Cverly optimistic
estimat,., prc blcms encount!red during the life or the -rogram,
inflation, and uncertainty azsociated hith the estimating
process itself contribute to the v:cst increases.
Findinqs/Conclusions: Uncertainty i3 the keynote ir, decisions
involvinq Federal programs wh ch span mdny years. Cuestions suci
as the following can provide k3eful and valuable iniorwationi
W.at significant uncertainties will drive cost to extremiities cf
a range? What are the chances that an ancertain event will
occur? What will minimize the occurrence of an uncertain or
risky situacion? What is the probabi.lity of exceedinq tue best
estimate of cost? of being below the hEst estiwate? At what
point in the ranqe will the program cease to be the most
cost-effective solution to meet the Deed? Agencies continue to
present early cost projections to the Congress as sinqle-poit
estimates despite the fact that they are highly misleading. A
range of probable cost should be presented in additin, to the
single, most likely, point estimate which would remain as
program and budget cost estimates. becommendations: Congress
should require that each agency submit to the ertinc.nt
oversight and appropriation committees an analysis ol the
uncertainties affecting eath program, in,,luding: an
identitication ot siquificant uncertajrnties that could cause
devA.ations in estimated program cost, a range of potential cost
around the point estimate reflecting the potential ccst changes,
and a statement of the likelihood of the actual cozt exceeding
certain predetermined levels. (RES)](ViewImageLocal?handle=hein.gao/gaobaawpq0001&div=1&collection=&method=preview&ext=.png&size=3)