Evaluation of the Risk Analysis and Cost Management (RACM) Model.

Abstract : IDA evaluated the RACM concept and computer software developed by Lockheed Martin Missiles and Space Company. RACM was designed to help defense contractors estimate risk margins for proposals they submit to DoD. RACM also contains a module for managing risk reserves during program execution. RACM is based on a particular set of assumptions regarding contractor behavior. Given these assumptions, IDA determined that RACM computes rapidly and essentially accurately. Many of RACM's best features could be easily duplicated in a commercial software environment, which would also open up the possibility of substituting Monte Carlo simulation for analytical approximation. IDA conducted a field test at Boeing Defense and Space Group to determine whether RACM is portable to another defense contractor's site. The Boeing team had difficulty both eliciting the input required by RACM and mapping its cost and risk drivers into those required by RACM. Although RACM may have proved useful at Lockheed Martin's Sunnyvale site, it does not, in its current form, appear to be generally applicable throughout the defense industry.