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44 Military Jet Engine Acquisition Although the parametric method is easy to use, developing para- metric relationships can be difficult. Despite the existence of well- defined methods and systems using OLS, the development process in parametric analysis is somewhat of an art. First, one needs to define the appropriate estimating parameters. This step is most critical in the development of parametric estimating relationships. How the parameters are determined often defines the ultimate usefulness of the relationship between variables. Next, the analyst must gather data (observations). Finally, those data then must be normalized and adjusted to a common basis. Another disadvantage of the parametric method is the lack of direct cause-and-effect relationships. Parametric equations developed through OLS only show associative influences of the dependent vari- able to the independent variables. For example, imagine that rotor inlet temperature is a term in a parametric relationship for unit pro- duction cost (having a positive coefficient). What might drive such a relationship? The regression results show only that higher produc- tion costs are correlated with higher inlet temperatures. The root cause could be something subtler. One possible explanation for the higher production costs is that higher inlet temperatures require more-expensive construction materials. On the other hand, the tur- bine blade materials, for example, could be difficult to machine and thus require more production hours, or have a higher scrap rate. An- other possibility is that additional equipment or greater part size is necessary to cool the engine effectively. Alternatively, a more com- plex (and expensive) combustor may be required for operating the engine. A bottom-up approach would have to consider all these pos- sible factors and could directly show the contribution of each factor. The parametric relationship does not address these causative factors. Parametric relationships are based on the correlation between his- torical data on independent parameters and on the cost of develop- ing and producing engines. Any forecast derived from using this method assumes that all the relationships inherent to the future en- gine being estimated still apply. So, extrapolation from using CERs based on historical data to forecast future costs of engines with a major technical improvement is perilous. Often, analysts may be un- aware that they are pushing a parametric relationship beyond the reasonable limits of the historical data.PDF Image | Military Jet Engine Acquisition Technology Basics and Cost-Estimating Methodology
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