“Should-cost review can reduce program costs without cutting back on scope or capabilities, or eroding suppliers’ profits.
The U.S. Department of Defense is experiencing unprecedented cost pressures as demands to reduce government spending rise. In this “doing more with the same—or less” environment, affordability of weapons programs and services is a hot topic.
Should-cost review is becoming the tool of choice to improve affordability. And for good reason. SCR, when implemented systematically, can reduce total system costs by 5 to 15 percent and subsystems costs by up to 40 percent.
The demand for affordability in the U.S. Department of Defense is underscored by the Under Secretary of Defense for Acquisition, Technology and Logistics. Dr. Ashton Carter, in a series of memos issued in 2010 and early 2011, stresses that a should-cost review (SCR) will serve as an important tool in attaining program affordability. He points out that should-cost targets are now required for all ACAT I, II and III programs and that progress toward these targets will be reviewed at major program milestones.
In other words, should-cost reviews are expected to be the basis for driving cost management or cost reduction results. Therefore, they must be more than “studies.” Rather, they must lay out specific initiatives that can be executed to manage or reduce costs and improve affordability.
We at A.T. Kearney believe the should-cost review is an opportunity (or challenge) for everyone involved in weapons programs to question the status quo and traditional ways of doing business, and to manage the supply chain and production processes in ways that improve efficiency, productivity and innovation. Furthermore, we see the SCR as a valuable tool for helping to improve affordability when it is employed systematically (but pragmatically), is tailored to the program’s specific situation, and has realistic implementation plans.
The end result of a successful SCR will be lower total program costs without eroding supplier profitability or cutting back on program scope or capabilities. It’s a win-win proposition for the DoD and its suppliers…”
https://www.atkearney.com/aerospace-defense/article?/a/should-cost-review-to-improve-affordability
Contributors: A.T. KearneyCategories: SIG U Resource, Whitepaper
SRC Type: Procurement Operations