ISSR: What Drives (Your) Program Costs? Achieving Step-Change Reduction on Department of Defense Platforms

In today’s political and financial environment, defense industry stakeholders cannot afford to not evolve to the next level of efficiency and cost-effectiveness in its platform development.

Program managers and defense manufacturers frequently are caught between opposing imperatives: deliver increasingly capable and complex systems while simultaneously reducing costs. In an era of uncertain defense budgets and a shrinking procurement base, the traditional approach of squeezing savings through incremental cost reduction initiatives no longer supports the targets required by Department of Defense (DoD) programs.

In response, a few innovative programs have initiated a step-change in performance, delivering more effective systems at a dramatically lower cost to the customer. Manufacturers have taken a “total cost” perspective by systematically evaluating all cost drivers, starting with the actual platform design.

To identify, analyze, and address a program’s cost drivers, Booz Allen Hamilton has applied its cost-driver framework based on inherent, structural, systemic, and realized (ISSR) costs. ISSR evaluates cost drivers based on four categories:

• Inherent costs, driven by the platform design
• Structural costs, driven by how the product is made
• Systemic costs, driven by how production is managed
• Realized costs, driven by the actual work practices.

Mike Jones, Eric Kronenberg, and Kurt Scherer are the authors of "ISSR: What Drives (Your) Program Costs?  Achieving Step-Change Reduction on Department of Defense Platforms."

study posted July 29, 2008

Additional Information

• Driving Cost Out of Submarine Production—Booz Allen’s innovative approach to boat building is helping the US Navy be ready for what’s next.