Procurements (Purchase or R&D) for Ballistic Missile Defense Systems

Focusing on THAAD, SM-3, and L-SAM

Authors

  • Hyuk-Ki Park
  • Jinho Lee Korea Naval Academy

DOI:

https://doi.org/10.37944/jams.v1i1.7

Keywords:

Ballistic Missile, Cost Analysis, Net Present Value, Sensitivity Analysis

Abstract

We perform cost analysis for evaluating alternatives to effectively defend the threat of North Korean ballistic missiles. As alternatives, THAAD, SM-3, and L-SAM are considered, and we analyze the factors affecting to the cost of acquiring alternatives depending on the way to procure them, e.g., by purchasing, or research & development (R&D). Assuming that each alternative can be operated for 30 years, the total cost, which consists of acquiring cost, operation/maintenance cost, and R&D cost, is compared using net present value. Furthermore, we perform sensitivity analysis for maintenance rate, terrain cost and increase rate of R&D cost that involve uncertainty for the future. Cost analysis results show that THAAD incurs the highest cost and SM-3 is the most economic alternative. However, sensitivity analysis shows that priority can be changed depending on uncertainty parameters. Although our results do not directly support decision-making on the best alternative due to its various uncertainties, these can provide a guideline on economic evaluation required for public policy decision-making process, especially under the situation that all the three alternatives cannot be acquired at the same time due to the limitation of defense budget.

 

THAAD

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Published

2018-09-22 — Updated on 2018-09-10

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How to Cite

Park, H.-K., & Lee, J. (2018). Procurements (Purchase or R&D) for Ballistic Missile Defense Systems: Focusing on THAAD, SM-3, and L-SAM. Journal of Advances in Military Studies, 1(1), 1-17. https://doi.org/10.37944/jams.v1i1.7 (Original work published September 22, 2018)