Effective Capital Provision within Government: Methodologies for Right-Sizing Base Infrastructure

Publication Date: September 2004

Publisher: Pardee Rand Graduate School

Author(s): Joshua Weed

Research Area: Military and defense

Type: Report

Abstract:

This study proposes a new, more efficient way to address a central policy problem facing the U.S. Air Force: How much capital infrastructure should the Air Force own rather than lease through other providers? The study looks specifically at an Air Force base lodging operation and evaluates policies for efficient government-owned capacity levels and contract-quarters utilization. The Air Force currently spends $4 million per year at Maxwell Air Force Base to house students in local hotels because of insufficient on-base capacity. Meanwhile, annual on-base occupancy figures reveal slack capacity in on-base facilities of approximately 20 percent. This dissertation examines how Air Force decisionmakers should evaluate contract-quarters usage versus occupancy rates to determine the on-base capacity that minimizes total cost. The analysis illustrates why current government metrics and methodologies are inadequate and provides an analytic approach suitable for capacity-sizing decisions in any variable-demand system. The author develops an inventory simulation model that determines the least-cost inventory (capacity) and allows decisionmakers to evaluate “what-if” policy scenarios that affect lodging.