Distribution Comparisons of EAC Cost Growth
To summarize our overall findings, we present Table 6. The table presents the mean, coefficient of variation (CV), the 15th and 85th percentile metrics for our recommended fitted distributions by WBS element. The CV is a standardized measure of dispersion of a probability distribution or frequency distribution. It is defined as the ratio of the standard deviation to the mean (Everitt, 1998). Values of 0.50 generally suggest high variation in a process.
TABLE 6. OVERALL SUMMARY MEASURES
WBS Element
15th Percentile
85th Percentile
CV
Mean
Cost Data
0.5021
1.5915
1.0983
2.7014
0.7292
1.0214
0.2152
1.9457
Fee
1.3205
1.3159
0.6951
3.0721
PME
0.6163
1.6355
1.1645
2.9325
SE
0.8293
1.0364
0.6799
5.2212
SEPM
1.0547
1.7694
0.9067
4.4066
ST&E
0.6225
1.6405
0.9129
2.9484
Training 1.6062 Note. CV = Coefficient of Variation; PME = Prime Mission Equipment; SE = Support Equipment; SEPM = Systems Engineering and Program Management; ST&E = System Test and Evaluation; WBS = Work Breakdown Structure. 0.7354 0.8720 0.5071 As with Tables 4 and 5, a few things appear prominent from Table 6. All the WBS elements display CVs greater than 0.50. Specifically, the mean value of these CVs equates to 0.80. Ideally, the mean EAC cost growth should be 1, reflecting no budget cost growth from the initial DD 1921 to the final EAC. The top three ratios of 1.77, 1.64, and 1.64 for SEPM, ST&E, and PME, respectively, reflect the mean budget cost growth of over 50% from the initial EAC. Lastly, the large 85th values reflect the skew right nature of either the lognormal or Weibull distribution. The mean value of all the 85th percentiles equates to 3.1, suggesting a few programs might have a final EAC of three times that anticipated from the initial EAC. We next discuss our findings and make a recommendation going forward. Conclusion As indicated at the beginning of this article, PMs require relatively accurate forecasts of cost, schedule, and performance to manage and to administer their projects effectively. With respect to cost, PMs generally rely on the EAC to forecast each component of their program.
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Defense ARJ , Spring 2025, Vol. 32 No. 1
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