An Application of Cost-Benefit Analysis to the USMC Program Objectives Memorandum (POM).

This report describes the work done in collaboration with the United States Marine Corps, on the development of a methodology to improve the 1979 Program Objectives Memorandum (POM) process. The generic approach chosen was cost-benefit analysis. The goal of cost-benefit analysis is to identify, for subsequent funding, those programs that optimize the total benefit to a decision maker within his budget constraints. The identification of optimal procurements is based upon determination of the 'true' costs and benefits of each program. 'True' or absolute costs and benefits are often very difficult to determine because subjective estimates must be made, and because some of the less-than-obvious costs and/or benefits may be overlooked. The programs involved in this analysis were all future capability items in the procurement appropriation. DDI's efforts were focused on obtaining good subjective estimates of the relative benefits for each of these programs. Psychologists and decision analysts have observed that the best way to obtain accurate quantifications of this sort is to use paried comparisons, that is, to ask the expert to make a series of choices between two packages of programs, each choice having certain implications about the benefits of the programs.