A Trade Study is a study that identifies a preferred solution among a list of qualified solutions. The trade study will examine these solutions against criteria such as; cost, schedule, performance, weight, system configuration, complexity, the use of Commercial Off-the-shelf (COTS), and many others. Trade Studies are performed throughout an acquisition program, from concept development thru system design. In systems engineering, they’re primarily used to determine operational and system-level requirements.
Definition: A Trade Study is a decision-making method used to identify the best solution among a group of proposed solutions.
Purpose of Trade Studies
The purpose of trade studies is to support decision-making throughout the life cycle of a program. Trade studies are conducted among operational capabilities, functional and performance requirements, design alternatives and their related manufacturing, testing, and support processes; program schedule; and life-cycle cost to systematically examine alternatives. Once alternatives have been identified, a trade study team applies a set of decision criteria to analyze the alternatives. These criteria are ‘traded’ to determine the optimal and recommended alternative.
Trade Study Methodology
Most trade studies are not strictly formal or informal; they usually fall between these two extremes. Generally, formal trade studies are indicated for high-value, high-risk, or other high-impact decisions. Not all trade studies should follow the full rigor of a formal process but should be tailored to the specific circumstances of the program such as: 
- Likelihood or severity of programmatic risk,
- Objectivity and quantitative data used,
- Details in available data, and
- Time, effort, and money are needed to conduct the trade study.
How to conduct a Trade Study
Conducting a trade study doesn’t have to be complicated. You are examining multiple courses of action (solutions) to a problem and choosing the best and more appropriate course of action. Here are a few steps in conducting a trade study.
- Step 1: Define the problem – Make sure you address the actual problem, not a symptom.
- Step 2: Define constraints on the course of actions (solutions).
- Step 3: Develop multiple courses of action (solutions) for the problem
- Step 4: Define evaluation criteria – How will you judge each course of action
- Step 5: Determine weight factors
- Step 6: Define the normalization scale
- Step 7: Conduct the actual trade study analysis – use a spreadsheet to keep track of your analysis
- Step 8: Perform Ranking – Determine the best actions to take and rank them from best to worst
- Step 9: Choose the appropriate Course of Action (solution)
Trade Study Lessons Learned
Some possible lessons learned about conducting a trade study are:
- Plan Ahead: A trade study requires time and resources to gather and analyze data, so it is important to plan ahead and allocate enough time and budget for the process. A trade study plan should include the scope, objectives, criteria, alternatives, evaluation methods, roles and responsibilities, schedule, and deliverables of the trade study.
- Involve Stakeholders: A trade study should involve relevant stakeholders from different perspectives and backgrounds, such as customers, users, subject matter experts, decision-makers, and vendors. Stakeholders can provide valuable input, feedback, and buy-in throughout the trade study process12.
- Define clear and measurable criteria: A trade study should use well-defined and measurable criteria to evaluate the alternatives. The criteria should reflect the objectives and constraints of the problem and be consistent, complete, independent, and non-redundant. The criteria should also be prioritized or weighted according to their importance12.
- Use appropriate evaluation methods: A trade study should use suitable evaluation methods to compare the alternatives against the criteria. The evaluation methods should be objective, transparent, and repeatable. Some common evaluation methods are scoring, ranking, weighting, or trade-off matrices.
- Document and communicate the results: A trade study should and succinctly present its findings and suggestions. The problem statement, objectives, criteria, alternatives, evaluation procedures, results, suggestions, assumptions, limitations, risks, and lessons learned should all be included in a trade study report. The report should also offer justification and supporting data for the choice.
Trade Studies support the following activities in the acquisition process and systems engineering:
- Alternative Architecture Analysis
- Requirements Analysis
- System Analysis and Control
- Functional Analysis and Allocation
- Design Synthesis
- Selected Preferred Alternatives
- Measures of Effectiveness
AcqLinks and References:
-  Defense Acquisition Guidebook (DAG)
- NAS System Engineering Manual – Trade Studies – Section 4.6
- White Paper: Trade Studies with Uncertain Information, INCOSE – July 2006
- SMC Systems Engineering Primer & Handbook
- White Paper: Standard Approach to Trade Studies: A Process Improvement Model that Enables Systems Engineers to Provide Information to the Project Manager by Going Beyond the Summary Matrix, INCOSE – Nov 2004