How do you define affordability? By combining our personal experience with Webster's definition of 'afford,' we can perhaps arrive at a more relevant meaning. Note that while it includes the purchase price and implies an ability to pay that price, it also covers the performance and availability requirements of the product or service. Naturally, all of this is through the customers' filter. Regardless of price, if a product or service doesn't respond to the buyer’s requirements or isn't available when needed, they can’t afford it.
The Department of Defense defines affordability as the degree to which the life-cycle cost of an acquisition program is in consonance with the long-range investment and force structure plans of the Department of Defense or individual DOD Components. Affordability procedures establish the basis for fostering greater program stability through the assessment of program affordability and the determination of affordability constraints. Affordability management is part of the OMB's balanced scorecard evaluation of government projects. It is also a Systems Engineering metric and -- for most business people -- a criteria for decision making.
Speaking from PRICE Systems' cost estimating perspective, Making the Case for Affordability Management, it is based on a credible estimate, a method for controlling project growth and a captured knowledge base from which to make future decisions. It isn't any one of these three things, it is all of them reinforcing one another and building upon one another at every gate in the project life cycle.
How do you define affordability at your company? Do you rely on analyses like CAIV or something else? What are your 'must have' tools? Tell us what you think!
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