ACAP Cost Risk and Uncertainty Analysis

Question 1

Which statistical technique is most commonly used in DoD cost risk analysis to model the probability distribution of a program's total cost?

Accepted Answer

Monte Carlo simulation

Answer

Monte Carlo simulation is the standard DoD method for propagating input uncertainties through a cost model to produce a probability distribution of total program cost.

Question 2

In cost risk analysis, what does 'S-curve' represent?

Accepted Answer

Cumulative probability distribution of cost outcomes

Answer

An S-curve displays the cumulative probability that actual cost will fall at or below a given value, showing the full range of likely outcomes.

Question 3

What is a 'point estimate' in the context of cost analysis?

Accepted Answer

A single deterministic value representing expected cost

Answer

A point estimate is a single value used to represent the expected cost without explicitly capturing uncertainty or range.

Question 4

Which risk percentile does DoD policy typically require programs to budget to when using probabilistic cost estimates?

Accepted Answer

80th percentile

Answer

DoD Instruction 5000.02 and related guidance direct programs to budget to the 80th percentile of the cost risk distribution to provide adequate funding confidence.

Question 5

What is the primary purpose of a sensitivity analysis in cost estimating?

Accepted Answer

To identify which input variables have the greatest impact on total cost

Answer

Sensitivity analysis reveals which cost drivers, when varied, produce the largest swings in the total estimate, guiding where risk mitigation effort should focus.

ACAP - Army Cost Analysis Position Practice Test

ACAP - Army Cost Analysis Position Practice Test

ACAP Cost Risk and Uncertainty Analysis