According to nhb 71205 every nasa programproject must

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Unformatted text preview: ply in systems engineering trade studies. The Office of Management and Budget (OMB) has mandated the use of a rate of seven percent for NASA systems when constant dollars (dollars adjusted to the price level as of some fixed point in time) are used in the equation. When nominal dollars (sometimes called then-year, runout or real-year dollars) are used, the OMB-mandated annual rate should be increased by the inflation rate assumed for that year. Either approach yields essentially the same PDV. For details, see OMB Circular A-94, Guidelines and Discount Rates for Benefit Cost Analysis of Federal Programs, October 1992. Discounting future costs is a way of making costs occurring in different years commensurable. When applied to a stream of future costs, the discounting procedure yields the present discounted value (PDV) of that stream. The effect of discounting is to reduce the contribution of costs incurred in the future relative to costs incurred in the near term. Discounting should be performed whether or not there is inflation, though care must be taken to ensure the right discount rate is used. (See sidebar on PDV.) In trade studies, different alternatives often have cost streams that differ with respect to time. One alternative with higher acquisition costs than another may offer lower operations and support costs. Without discounting, it would be difficult to know which stream truly represents the lower life-cycle cost. Trade studies should report the PDV of life-cycle cost for each alternative as an outcome variable. Difficult-To-Measure Costs . In practice, some costs pose special problems. These special problems, which are not unique to NASA systems, usually occur in two areas: (a) when alternatives have differences in the irreducible chances of loss of life and (b) when externalities are present. Two examples of externalities that impose costs are pollution caused by some launch systems and the creation of orbital debris. Because it is difficult to place a dol...
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This document was uploaded on 02/26/2014 for the course E 515 at University of Louisiana at Lafayette.

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