A Theory of Cost-Effectiveness for Military Systems Analysis

This paper presents a theoretical basis for cost-effectiveness analysis. It is argued that, frequently, a range of effectiveness or cost levels may be acceptable to whoever must ultimately decide which military system (if any) should be acquired. The function of the analyst is to present a schedule of alternatives and not to optimize in the sense that he recommends the selection of a particular alternative. The formulation of the schedule is discussed where the cost and effectiveness associated with each alternative are viewed as random variables. The paper concludes with some general observations relating to military system selection.