The Stochastic Active-Reserve Assessment (SARA) Model: Force Planning under Uncertainty

We model the demand for force structure as a function of the probability of different kinds of operational activity taking place in a given month. A range of operations is postulated and a notional force requirement is specified for every kind of operation. The Army's force generating process is modeled in a flexible fashion and the ability of various force structures to meet demand is estimated. Each of these force structures is conceptually associated with a particular operating cost and recruiting requirement. The effectiveness of the particular force structure is measured by the extent to which it meets operational requirements. Because of the probabilistic nature of future operational activity, we simulate 10,000 possible futures. This permits us to estimate the distribution of operational shortfalls and, thus, the risk associated with alternative force structures. We also estimate the cost of each force structure. This allows us to characterize every force structure in risk-cost space for a given set of operational probabilities and to identify the force structures on the efficient frontier--those alternatives for which there is no way to reduce risk without increasing costs or to reduce costs without increasing risk. Finally, by comparing efficient frontiers associated with different assumptions about operational probabilities, we illuminate how the force size and cost associated with a given level of risk depends on expectations concerning the nature of future requirements.