1st Edition

Military Cost–Benefit Analysis Theory and practice

Edited By Francois Melese, Anke Richter, Binyam Solomon Copyright 2015
    468 Pages 118 B/W Illustrations
    by Routledge

    468 Pages 118 B/W Illustrations
    by Routledge

    This is the first comprehensive book on Military Cost-Benefit Analysis and provides novel approaches to structuring cost-benefit and affordability analysis amidst an uncertain defense environment and cloudy fiscal prospects. Lifting the veil on military Cost-Benefit Analysis, this volume offers several new practical tools designed to guide defense investments (and divestments), combined with a selection of real-world applications.

    The widespread employment of Cost-Benefit Analysis offers a unique opportunity to transform legacy defense forces into efficient, effective, and accountable 21st century organizations. A synthesis of economics, statistics and decision theory, CBA is currently used in a wide range of defense applications in countries around the world: i) to shape national security strategy, ii) to set acquisition policy, and iii) to inform critical investments in people, equipment, infrastructure, services and supplies. As sovereign debt challenges squeeze national budgets, and emerging threats disrupt traditional notions of security, this volume offers valuable tools to navigate the political landscape, meet calls for fiscal accountability, and boost the effectiveness of defense investments to help guarantee future peace and stability.

    A valuable resource for scholars, practitioners, novices and experts, this book offers a comprehensive overview of Military Cost-Benefit Analysis and will appeal to anyone interested or involved in improving national security, and will also be of general interest to those responsible for major government programs, projects or policies.

    I. Introduction and Problem Formulation 1. Introduction - Military Cost-Benefit Analysis (CBA): Theory & Practice 2. Allocating National Security Resources 3. Measuring Defense Output: An Economics Perspective 4. The Economic Evaluation of Alternatives (EEoA) II. Measuring Costs and Future Funding 5. Cost Analysis 6. Advances in Cost Estimating : A Demonstration of Advanced Machine Leaning Techniques for Cost Estimation 7. Facing Future Funding Realities: Forecasting Budgets beyond the FYDP III. Measuring Effectiveness 8. Multiple Objective Decision-Making 9. A New Approach to Evaluate Safety and Force Protection Investments: Tradeoffs between Money Spent and Lives Saved IV. New Approaches to Military Cost-Benefit Analysis 10. The Role of Cost-Effectiveness Analysis in Allocating Defense Resources 11. A Risk-Based Approach to Cost-Benefit Analysis: Strategic Real Options, Monte Carlo Simulation, Knowledge Value Added, and Portfolio Optimization 12. Extensions of the Greenfield-Persselin Optimal Fleet Replacement Model: Applications to the Canadian Forces CP-140A Arcturus Fleet V. Selected Applications 13. Embedding Affordability Assessments in Military Cost-Benefit Analysis: Defense Modernization in Bulgaria 14. Real Options in Military Acquisition: A Retrospective Case Study of the Javelin Anti-tank Missile System 15. An Application of Military Cost-Benefit Analysis in a Major Defense Acquisition: The C-17 Transport Aircraft 16. Cost-Effectiveness Analysis of Autonomous Aerial Platforms and Communications Payloads 17. Time Discounting in Military Cost-Benefit Analysis (CBA)


    Francois Melese is Professor of Economics at the Defense Resources Management Institute (DRMI) in the Graduate School of Business and Public Policy at the Naval Postgraduate School, USA.

    Anke Richter is Professor of Operations Research at the Defense Resources Management Institute (DRMI) in the Graduate School of Business and Public Policy at the Naval Postgraduate School, USA.

    Binyam Solomon is a Senior Scientist with Defence Research and Development Canada.

    This is a thorough, timely and up-to-date treatment of cost-benefit analysis in the defence environment. Its analysis should be helpful to all those potentially and actually involved not only in weapons system acquisition but in public procurement more broadly.

    Peter Hall, Emeritus Professor, School of Business, University of New South Wales, Canberra.


    At a time when government budgets and public sector procurement are under immense pressure globally, it is imperative that practitioners and students alike fully understand the appropriate techniques available to properly evaluate such procurement in the interests of effective decision-making. This book makes a unique contribution in this regard providing, for the first time, an accessible handbook designed to meet this objective which focuses on the military sector where some of the most difficult decisions are currently having to be made. Both students and practitioners in the military sector will find this book essential reading and the ideas contained here will also resonate with those working in or studying other parts of the public sector.

    Professor Derek Braddon, Emeritus Professor of Economics University of the West of England, Bristol, UK.