Analysis of the Management of Funds for Risk and Uncertainty in the Department of Defense

摘要

Estimating and budgeting for risk and uncertainty in the Air Force and the Department of Defense is haphazard and inconsistent. Many cost overruns occur, especially in R&D where the risk and uncertainty is highest. The main objective of this thesis was to better identify the issues concerning the use of management reserves to budget for uncertainty. It was found that no one management technique or policy would cover all situations for all services within the Department of Defense. Only two methods stood out as candidates which would meet Carlucci's initiative requiring the services to budget funds for technological risk. They were the Air Force RISK Model and the Army's TRACE Model. The main difference in them is an issue of management style. TRACE requires a centralized money fund for risk while the Air Force RISK Model was designed to allow a decentralized money fund for risk under the direct control of the program manager. It was concluded that better risk management techniques are needed rather than development of more mathematical techniques to quantify risk. Finally, it was recommended that further research be conducted to evaluate managers' subjective decision making preferences. The information would then be used to aid the manager in making better subjective probability selections. (Author)