Combat Vehicle Cost
Combat vehicle design tradeoffs include requirements and performance parameters. However, there are two other parameters that affect the Army’s ability to procure a combat vehicle that derive from requirements: cost and schedule. Cost is the biggest driver; an unaffordable but perfect system provides no capability to the force. Affordability was a primary or secondary factor in the demise of ASM, FCS, and GCV, both at the individual vehicle level and the Army’s combat vehicle fleet portfolio level. Controlling cost is paramount to delivering capability.
For simplicity, cost is broken into three groups that make up the total system cost for the vehicle: development cost, procurement cost, and operating and sustainment cost. Roughly, 70% of the total cost of a system is set when making requirements tradeoffs, before detailed engineering design begins, because operating concept and system requirements drive design trades and remain relatively fixed once design begins. One way to reduce cost throughout the design process is to re-evaluate requirements that prove to be cost drivers. A combat vehicle’s development cost is a small fraction of procurement cost, which is a fraction of operating, and sustainment costs.
System complexity and development time drive cost primarily, since the largest fraction of development cost goes to paying the personnel conducting the detailed design and management of the program. Greater complexity requires more personnel; and, more time increases the period over which the salaries are paid. The second largest driver in development cost is the number of prototypes and amount of testing, as prototypes are typically very expensive compared to final production articles and required testing drives total development time.
Vehicle design complexity and the number of total systems procured over a specific time drive procurement cost. Producing a greater number of systems in a sustained manner drives down cost; increased production speed reduces production cost by reducing the carrying costs associated with operating production facilities for long periods. For example, the Bradley A3’s production cost declined by 25% over its lifetime as the total number procured increased from 588 to 2561 and the rate of production per year increased to approximately 700 at peak production. Thus, some procurement costs can decrease while a system is in production, but by how much depends upon the system’s initial procurement costs.
The starting point for procurement costs is the complexity of the system driven by the size and weight of the system and its number and level of required capabilities. Because larger and heavier systems require more material; bigger, more robust, and more expensive subsystems; more complex manufacturing techniques; and larger and more capable production facilities, increased size and weight directly correlates to increased system cost. Of the top five cost drivers in combat vehicle design, survivability systems, power package and drivetrain, and hull structure are direct results of the system’s size and weight. Other cost drivers result from vehicle capability (sensors fire controls, armament, and others). While commercial advancements in computing components are reducing cost and increasing capability in each new generation of equipment (aided by large production volumes in the commercial sector); this does not happen for armor, engines, weapons, and structures, where more capability equals higher cost.
Initial system design determines sustainment costs and are a function of system operating requirements (fuel economy, other consumables), the amount the system is used, the reliability of the system, and the level of system capability. Capable components translate to expensive spares. Systems designed initially for higher reliability and graceful degradation tend to increase development time and both development and procurement cost. If well balanced, these initial costs translate to life cycle cost savings. Sustainment costs decrease over time if system reliability improves in service, but typically not much beyond the initial design point. System durability and frequency of use becomes more important the longer the system remains in operation, as these parameters drive how often and to what extent the vehicle must be overhauled. Electronic complexity further increase sustainment cost over time, as electronic components become obsolete requiring vehicle subsystems to be redesigned and replaced if the vehicle is maintained over an extended operating period.
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