Cost and Effectiveness Integration

Abstract : DoDD 5000.2-M says There is no magic formula for combining cost and effectiveness measures to identify a preferred alternative. The manual goes on the recommend rank ordering cost, rank ordering effectiveness, and letting the decision maker decide which is most important to him. Pressure in the Department of Defense is strong for a technique or methodology that will provide a point value for alternatives that can be compared to other point values to decide which is most cost effective. This paper describes some of the history of attempts to integrate cost and effectiveness, from the long discredited relative work approach, through cost-per-kill, to a sufficiency approach. The strengths and weaknesses of the various approaches that have been tried are discussed along with criteria for the proper use of those that offer promise for the future.