Uncertainties of LCC Predictions
Many Life Cycle Cost (LCC) Models treat costs as “point estimates“ or “most likely” predictions of what actual costs will be many years in the future. Actual costs, however, are not exact, but are subject to considerable uncertainty. This paper examines an analytical method for aggregating LCC component and subsystem costs so as to produce a total cost prediction and the uncertainty around it. The technique has been applied to aircraft and space based radar costs.
Four problems of LCC prediction will be given. Recent work by McNichols (1979) solves the first two problems. This paper describes a solution for the third problem.
KeywordsLife Cycle Cost Uncertainty Distribution Second Order Approximation Cost Element Compound Distribution
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