|dc.description.abstract||Operating cost escalation is considered one of the major concerns in the Norwegian Defence’s long term planning
processes, as it poses a threat to a sound investment portion in the Defence Budgets. Thorough knowledge of this topic
is therefore of vital importance in order to find countermeasures against such development.
This report estimates the historical operating cost escalation in the Norwegian Defence for the period 1994-2005. The
growth in the operating costs is measured separately for personnel related expenses and other equipment costs. The
annual personnel escalation factor is estimated to have been 4.5 % per man-labour year. Other equipment costs have
grown by an annual factor of 2.4 %, measured as cost figures adjusted for the levels of activity.
Furthermore the report estimates the future development in the cost escalation factors. Personnel related costs are
expected to grow with a factor of 1.8 % per man-labour year in the long run, and 2.5 % per man-labour year in the
medium run (2007-2012). The predictions are based on future economic growth and changes in the personnel structure.
Other equipment is expected to have an escalation factor of 1.6 % in the long run and 1.7 % in the medium run.
Finally it is pointed out that fluctuations in the operating cost escalation may be a natural part of a desired development
for the Norwegian Defence, and consequently a fixed target for the annual escalation factor may be a sub-optimization.||en_GB