Accession Number : ADA319547

Title :   An Analysis of the Relationship Between Risk Alignment and Cost Performance.

Descriptive Note : Master's thesis,

Corporate Author : AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH

Personal Author(s) : Wegner, Christopher M.

PDF Url : ADA319547

Report Date : SEP 1996

Pagination or Media Count : 86

Abstract : This thesis investigates the relationship between risk alignment and cost performance in DoD procurement. Both the government and the contractor conduct independent assessments of the perceived risk in a contract. The results of inaccurate risk assessments are undesirable consequences, one of which is the inability to achieve cost targets. If both the contractor's and the government's perceptions of risk are in alignment with the actual risk involved in a contract, then we would expect minimal impact. If, however, either or both parties fail to accurately assess the actual risk, then we would expect consequences, such as cost overrun/underrun. The level of cost overrun/underrun can be determined by examining the level of alignment between the actual risk and each party's perception of the risk. Results indicate a significant potential for cost growth when both the government and the contractor underestimate the actual risk. In this context, the level of cost growth experienced on a contract is a reflection of the adequacy of the parties' risk assessments. Failure to accurately assess risk could result in a lack of sufficient 'safeguards' necessary to help mitigate the damaging effects of risk inherent in a contract.

Descriptors :   *COST EFFECTIVENESS, *CONTRACT ADMINISTRATION, *SYSTEMS ANALYSIS, TEST AND EVALUATION, RISK, GROWTH(GENERAL), DAMAGE ASSESSMENT, THESES, ALIGNMENT, COSTS, PROCUREMENT, PERCEPTION, COST OVERRUNS.

Subject Categories : Administration and Management
      Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE