This paper reports on an analysis of cost indexes carried out by the Institute for Defense Analyses (IDA) for the Cost Assessment and Program Evaluation (CAPE) directorate in the Office of the Secretary of Defense (OSD). The research is designed to help CAPE meet the task it was given by the 2009 Weapon Systems Acquisition Reform Act (WSARA), now part of Public Law 111-23, of assessing and updating the cost indexes that the Department of Defense (DoD) employs to ensure the use of realistic cost estimates. Our broader research carries out analysis of three questions: What problems are escalation rates meant to solve, how well do current indexes solve them, and are there other indexes that might do a better job? This paper includes a summary of the findings on the first two questions and focuses the most attention on the third.
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