Resolving America’s Defense Strategy-Resource Mismatch: The Case for Cost-Per-Effect Analysis
(Source: Mitchell Institute for Aerospace Studies; issued July 8, 2020)
Building the most effective, efficient Air Force demands focusing on solutions that realize best mission value. Wars are not won by lowest-cost bidders. They are won by applying more capable systems in innovative ways to best achieve desired outcomes or effects, not over emphasize input measures like unit cost, cost per flying hour, or total sustainment cost over the lifetime of a program.

While this seems obvious, a continued narrow focus on certain quantitative metrics would strongly suggest otherwise. Indeed, “effectiveness” has largely been missing from the goal of cost-effectiveness in procuring military systems. Though well-intentioned, this approach too often yields capabilities that drive more expensive, less capable combat options in an operational context.

Looking to future investments, the concept of “cost” needs to focus less on individual systems and more on the enterprise resources required to achieve mission goals. This means implementing a “cost-per-effect” metric.

For the purposes of this policy paper, a cost-per-effect assessment measures the sum of what it takes to net a desired mission result, not just a single system’s acquisition and support costs without necessary context surrounding the capability’s actual use. For instance, F-35s, B-21s, and other advanced weapon systems may appear more costly on a per-unit basis than less-capable legacy aircraft designs, but enterprise assessments illustrate their potential to complete mission objectives more efficiently and capably, lowering overall operational expense. As such, they are a far more cost-effective option.

Click here for the full report (25 PDF pages), on the Mitchell Institute website.

(EDITOR’S NOTE: The reason criteria “like unit cost, cost per flying hour, or total sustainment cost over the lifetime of a program” are used to evaluate weapon systems is because they are tangible, reasonably objective to define and cannot be easily manipulated.
Using “cost per effect” instead, as proposed by this paper, would move away from arithmetic objectivity and into the realm of subjectivity.
Furthermore, the true “effects” of military operations can only be determined after the fact – sometimes, many years after – so using a “cost-per-effect” benchmark is, in reality, useless for evaluating military aircraft in peacetime, and specifically in their development and production phases.
But is does offer one advantage for some: it is easily manipulated by adding or subtracting what effectors, and how many, are counted.
When reading this paper, a pinch of salt may be a useful accessory.)


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