In an effort to reduce the total cost of ownership of military acquisitions, the US Department of the Navy initiated a program that recognizes that cost can be balanced against schedule and performance to make design decisions. Realistic cost objectives are identified that will still allow for meeting the objectives of the warfighters. The CAIV effort is an on-going process from program beginning to end.

CAIV is a top-down, bottoms-up, continuous, and comprehensive approach to cost savings. It recognizes that allowances may need to be made in relaxing requirements or reducing capabilities that are not cost effective to produce. Sometimes, a small increase in capability requires a large expenditure of funds. CAIV identifies the point where the desired capability has been achieved at an acceptable expenditure of funds and resources. At the same time, key requirements must be identified that may not be traded off at any cost.

In addition to performance trade-offs, incentives are offered to suppliers and contractors to deliver cost efficient products to lower the total life cycle cost of systems. This includes award fees during design and development and creates a willingness to do business in the future. CAIV involves a certain amount of risk, so proper risk management techniques must be employed to ensure that the desired performance is not compromised while meeting cost objectives.

It is now recognized that the commercial market is demanding performance equal to or better than that needed by the DoD. The general population...