COST EFFECTIVENESS ANALYSIS MODEL OF ARMY’S WARRANTIES

Prior to acquisition of a warranty, a cost effectiveness analysis is required to determine the value of the potential benefits received in comparison to the contract cost of the warranty and the Army cost of administration and execution. The objective of the Army’s computerized warranty model (WARM) is to provide the user with an analytical approach for quantitatively assessing the cost effectiveness of warranties. The model provides a "should-cost" for a warranty and a cost effective analysis to contrast both the warranty and non-warranty alternatives. The model further assesses probabilistic risk and sensititivity analysis and examines a weapon system's life cycle cost with and without a warranty.