342 Appendix 2: Product Upgrades Based on Minimum Expected Quality Loss
Assumptions
The following seven assumptions are made to develop a general quality loss
function:
A1: The total quality loss (L n (x)) consists of the stakeholders’ loss plus
unknown losses.
A2: If the level of quality equals the target value of the quality (i.e., m), the
total quality loss is to be zero (or the minimum loss that is inherent
in the system).

A3: If the acquisition phase is production and deployment, the value of
shape parameter n is equal to 2.

A4: The minimum value of a shape parameter is close to zero and the
value of the shape parameter in the concept refinement phase of the
acquisition phases varies from 0 to 1.

A5: When the acquisition phases are the technology development or
system development and demonstration phase, the range value of
shape parameter varies from greater than one to less than two.

A6: After the production and deployment phase, the value of the shape
parameter is greater than two.

A7: The probability distribution of the quality response remains the
same regardless of the acquisition phases.

Notation
C b : Baseline cost with a constant value.
C s : If the type of quality characteristic is smaller-the-better, this means
a proportionality constant of stakeholder’s loss per response of quality. Additionally, if the type of quality characteristic is larger-thebetter, it means a proportionality constant of developer’s or
manufacturer’s loss per response of quality.
C l : If the type of quality characteristic is larger-the-better, this means a
proportionality constant of developer’s or manufacturer’s loss per
response of quality. Additionally, if the type of quality characteristic
is smaller-the-better, it means proportionality constant of the stakeholder’s loss per response of quality.
n: Shape parameter for representing an acquisition phase of a weapon
system (n > 0).
x: Response of quality.