This is just an Excerpt from a larger document, click here to view the entire document.CAIV versus Design to Cost
At first glance, CAIV may appear to be equivalent to another concept, Design to Cost (DTC). Certainly, similarities exist. Both are intended to control costs. Both require trade-offs. Both are implemented during the acquisition of a system. There, the similarities end. The primary focus of the DTC program is on the projected average unit procurement costs. Projected operations and support (O&S) cost objectives receive only secondary attention. Officially, DTC was supposed to identify drivers of downstream costs for specific weapons systems, to do so early in the life of that acquistion program, and to consider ways to keep those costs under control. In practice, DTC focuses on controlling near-term costs. Few incentives are given to spend development funds to reduce production and O&S costs. Trades are usually a case of reducing requirements to stay within a unit production cost target.
CAIV, on the other hand, is clearly aimed at managing to a life cycle cost objective. Furthermore, under CAIV the objectives of trade-offs are more ambitious and sophisticated. As articulated by Dr. Jacques Gansler, Under Secretary of Defense for Acquisition and Technology, at a 1998 conference1, "CAIV is not intended to force 80% solutions in order to stay within a cost ceiling; it is intended to force better ways to get a 100% solution within the cost ceiling." At times, relaxing one or more requirements may be the only way to stay within the cost. Nevertheless, working with the contractor to find innovative ways to achieve the required performance within the cost ceiling is clearly the first priority. Other Acquisition Reform initiatives are intended to provide contractors with the flexibility and motivation to innovate. Clearly, the various initiatives, including CAIV, support each other, and all are needed to achieve the goal of affordable, superior systems.
Under CAIV, it is important to include the user, support, and acquisition communities on the acquisition team. A principal goal of the team should be to avoid investments that yield a poor return. An example of such an investment might be striving to achieve a performance goal, the final five percent of which drives fifty percent of the cost. Dr. Gansler's predecessor, Dr. Paul Kaminski, noted that setting the cost is more involved than simply determining the price the market will bear and subtracting the profit margin. He described the past concern with cost as one of looking at cost after 80% of it had already been determined (see Figure 1). He proposed that representatives of the financial community be involved early, and that cost, performance, design, and schedule be evaluated together throughout the acquisition process. Cost, schedule, and performance need to be "owned" by the entire acquisition team.
Figure 1. Life cycle costs are determined early in a productís development (Click to Zoom)
To maximize the benefits of CAIV, some proponents recommend defining system performance parameters in terms of thresholds and objectives, thereby establishing a trade space (Figure 2). Thresholds are the minimum acceptable system characteristics/
capabilities or Key Performance Parameters (KPP) or Critical Performance Criteria. Objectives include desired characteristics and capabilities above the thresholds. Trade space allows offerors, in response to a Request for Proposal, the flexibility to propose the maximum number of objectives over the KPPs but still within the CAIV cost objective.
Figure 2. Trade space provides flexibility (Click to Zoom)