How Systems Analysis, Cost-Effectiveness Analysis, or Benefit-Cost Analysis First Became Influential in Federal Government Program Decision-Making

Abstract

In 1948, the RAND Corporation, formed to connect military planning with research and development decisions, became an independent nonprofit organization. Before then, cost-effectiveness analysis, benefit-cost analysis, and systems analysis had no established home in the federal government. In the 1950s, under the leadership of Charles Hitch, Chief, RAND Economics, undertook a program of activities they called “systems analysis,” including evaluation of the costs and effectiveness of weapon systems. In 1961, Robert McNamara appointed Hitch to be the Comptroller of the Department of Defense and invited Hitch to carry out his vision he described as “Programming and Systems Analysis.” Programming became the Planning, Programming, Budgeting System (PPBS) and the Five-Year Defense Program that linked strategies to forces to budgets. Systems Analysis assisted the Secretary to make choices of weapon systems and strategies. In 1965, Hitch returned to California and ultimately became President of the university. McNamara wanted Systems Analysis to report directly to him, and on his recommendation, President Lyndon Johnson appointed me Assistant Secretary for Systems Analysis. In 1966, the President directed that all departments in the executive branch establish offices based on the Systems Analysis model. In 1967, Henry S. Rowen became President of the RAND Corporation. He broadened RAND’s scope beyond the military to include Health Services, education, urban problems including homelessness, ethics in scientific research, and climate research. In 1970, Rowen led the establishment of the Pardee RAND Graduate School, offering a doctoral degree in Public Policy Analysis to extend widely the application of the RAND Systems Analysis approach to many fields.