Life Cycle Cost Composition MILCON Facilities Disposal O&M (or others as appropriate) RDT & E Development Costs of PME & Support Items Systems Engineering Program Management Test & Evaluation Development Cost Operations & Support • O&M, MILPERS Operating and (or others as appropriate) PROCUREMENT Initial Spares Prime Mission Equipment (PME) Support Items Flyaway Cost Weapon System Cost Procurement Cost Life Cycle Cost Program Acquisition Cost

Cost Estimating Requirements ACAT IC & ID (MDAP) ACAT IA (MAIS) POE Program initiation & all subsequent Program initiation & all subsequent milestones, including FRP DR milestones - Includes Economic Analysis CARD MS A & all subsequent milestones MS A & whenever including FRP DR Economic Analysis is required - Draft 180 days prior to OIPT/milestone - Draft 180 days prior to OIPT/milestone - Final 45 days prior to OIPT/milestone - Final 45 days prior to OIPT/milestone CCE MS A and all subsequent milestones MS A and whenever an Economic Analysis including FRP DR is required ICE Required by law for all MDAP programs * - Prepared by OSD CAPE for ACAT ID, and ACAT IC at discretion of USD (AT&L) - Prepared by component cost agency (AFCAA, DASA-CE, NCCA) for ACAT IC (if no CAPE estimate) - In advance of any certification under Title 10, USC, Section 2366a (MS A) and Section 2366b (MS B) - In advance of any decision to enter low-rate initial production (LRIP) (MS C) or full-rate production (FRP DR) - In advance of any certification of MDAPs that experience critical cost growth (Title 10, USC, Sec 2433a) - In advance of any report of Critical Program Changes for MAIS (Title 10, USC, Sec 2445c(f)) *ICE statutory requirement (Title 10, US Code, Sec 2434) and P.L. 111-23, May 22, 2009 Source: DoDI 5000.02, January 2015 and Weapon Systems Acquisition Reform Act of 2009 CARD: Basically must be prepared any time an independent estimate (ICE or CCA) is to be done POE: Every ACAT I and IA program must have a life cycle cost estimate at each milestone. This is inferred from DoD 5000.2R. Note that ACAT IA estimates are to include estimates of benefits as well as costs (to determine ROI). CCA: These requirements are taken from DoD 5000.2R. Note that a CCA serves as the ICE for an ACAT IC program when CAPE does not perform ICE. Why no CCA MSB for ACAT IA pgms? Majority of costs are in development ICE: Title 10, USC Sec 2434 requires ICE at MS II and III for MDAPs; DoD 5000.2R requires ICE at MS A, B, C. CAPE will do ICE for all ACAT ID programs and those ACAT IC programs requested by USD (A&T). Note that ACAT IA programs are not subject to Title 10 requirement because they are not weapon systems (MDAPs). TRANS: Now let’s take a look at the review process for these estimates ACAT II & ACAT III: POE (and, at MDA discretion, an independent cost estimate prepared by the component cost agency) at program initiation and all subsequent milestones AFCAA = Air Force Cost Analysis Agency ACAT = Acquisition Category CAPE = Cost Assessment & Program Evaluation CARD = Cost Analysis Requirements Description CCE = Component Cost Estimate DASA-CE = Dep Asst Sec of Army (Cost & Economics) FRP DR = Full Rate Production Decision Review ICE = Independent Cost Estimate MAIS = Major Automated Information System MDA = Milestone Decision Authority MDAP = Major Defense Acquisition Program NCCA = Naval Center for Cost Analysis OIPT = Overarching Integrated Product Team POE = Program Office Estimate USD(AT&L) = Under Secretary of Defense (Acquisition, Technology, & Logistics)

PPBE – Planning Phase - Lead by USD (P) YEAR 1 FEB/MAR Elapsed Time: 15-16 Months YEAR 2 APR/MAY President National Security Council CIA/DIA/JCS/OSD CIA – Central Intelligence Agency COCOM – Combatant Commander CPR – Chairman’s Program Recommendation DIA – Defense Intelligence Agency DPG – Defense Planning Guidance DSR – Defense Strategy Review formerly known as the Quadrennial Defense Review JCS – Joint Chiefs of Staff NDS – National Defense Strategy NMS – National Military Strategy NSS – National Security Strategy OSD – Office of the Secretary of Defense USD(P) – Undersecretary of Defense (Policy) NSS Every 4 Years Guidance for POM/BES submission and OSD Program & Budget Review OSD NDS DSR DPG Level New slide - Removed reference to SPRs With one exception, this slide depicts the “new” annual Planning phase that is to be used for the PPBE cycle starting in Calendar Year 2010 and which will, ultimately produce the Defense portion of the President’s Budget for FY2012. The one exception to the annual process is the QDR which is conducted in the 1st year of an administration and submitted to Congress in the 2nd year. The DPPG replaces the GDF (Guidance for Development of the Force) and the JPG (Joint Programming Guidance) and is signed by the SECDEF. The FEAs are intended to address major issues for the SECDEF early in the POM/BES review process. For the Calendar Year 2010 process the SECDEF has selected eight major issues. The Director, CAPE is the Executive Secretary for the FEAs and tri-chairs the process with the VCJCS and the USD(P). Issues nominated but not selected for the FEA review process will be addressed by the DEPSECDEF through the Deputy’s Advisory Working Group (DAWG). JCS Planning Phase focus: Threat vs. Capabilities Update strategy Guidance for Programming & Budgeting NMS Level CPR (JCS, COCOMs, SERVICES)

PPBE - Program Review JUL AUG SEP OCT NOV CAPE POM Issue Resolution CAPE – Cost Assessment & Prgm Evaluation CPA – Chairman’s Program Assessment DEPSECDEF – Deputy Secretary of Defense DoD – Department of Defense DMAG – Deputy’s Management Action Group DPG – Defense Planning Guidance FYDP – Future Years Defense Program POM – Program Objectives Memorandum RMD – Resource Management Decision SLRG – Senior Leader Review Group SECDEF – Secretary of Defense Components/ Defense Agencies Issue Resolution SECDEF / DEPSECDEF SLRG & DMAG POM CAPE CPA JCS FYDP Update 3-Star Group Teams DoD “Large Group” Programmatic RMD Program Review focus: Compliance with DPG

Services / PEO / PM Answer / Reclama OSD/OMB Budget Hearings PPBE – Budget Review BES – Budget Estimate Submission FYDP – Future Years Defense Program MBI – Major Budget Issues OMB – Office of Management and Budget OSD – Office of the Secretary of Defense PEO – Program Executive Officer PB – President’s Budget PM – Program Manager RMD – Resource Management Decision USD(C) – Undersecretary of Defense (Comptroller) Components/ Defense Agencies BES PB MBI USD(C) & OMB FYDP Update Services / PEO / PM Answer / Reclama SEP OCT NOV DEC JAN/FEB Budget RMDs Adv Questions/ OSD/OMB Budget Hearings Budget Review focus: Pricing Funding policies Phasing Budget execution

Resource Allocation Process

Congressional Enactment Timetable JAN FEB MAR APR MAY JUN JUL AUG SEP OCT ^ 15 15 PRES BUDGET “TARGET” FISCAL YEAR COMMITTEE INPUTS FLOOR HRNGS MARKS FLOOR HRNGS MARKS FLOOR HOUSE SENATE AUTHORIZATION APPROPRIATION BUDGET RESOLUTION CONF ^ RESOLUTION This is a notional timetable -- based on perfect conditions (which almost never happens in real life.) Committees (HBC/SBC, HASC/SASC, HAC-D/SAC-D) Budget Resolution is not a law, but ceilings are binding If point of order because ceiling exceeded, 60% vote to pass Should be passed before Auth/Approp begin debating legislation Auth/Approp all going on at same time (House tends to lead Senate) Language (Committee and Conference Reports) TRANSITION: Now that we’ve seen the overall flow of a bill through Congress, let’s look at what DoD can do to affect Congressional action during the process. After the Committees mark up the PB, DoD attempts to convince Congress that some of the marks will be counterproductive -- these are called appeals. BILL / RPT SAC HRNGS MARK-UP FLOOR HAC HRNGS MARK-UP FLOOR SASC HRNGS MARK-UP FLOOR HASC HRNGS MARK-UP FLOOR FLOOR CONF /RPT ^ ACT ^ ACT

Below Threshold Reprogramming Amounts are Cumulative Over Entire Period of Obligation Availability APPRN MAX INTO MAX OUT LEVEL OF CONTROL OBL AVAIL Lesser of + $10 M or + 20% Lesser of - $10 M or - 20% RDT & E Program Element 2 Years Lesser of + $20 M or + 20% Lesser of - $20 M or - 20% 3 Years SCN: 5 Years Line Item PROC Budget Activity (or Defense Agency) Some Sub-Activity Limitations on Decreases (see reference below) O & M + $15 M - $15 M 1 Year No Specific Congressional Restriction MILPERS + $10 M 1 Year Budget Activity BTR actions are approved by individual services. Service Comptrollers can reprogram these amounts without prior approval of SECDEF or Congress. These thresholds apply only within Appropriation accts and within the same FY Delegated to different levels in each Service Must identify source as well as bill Go thru thresholds MILCON has its own appropriation bill (and its own rules in the FMR) Obligation Availability: Remember that when we talk about reprogrammings, we’re only talking about those available years (01/02 for RDT&E, 00, 01, 02 for procurement). 03 is in prep for PBl. Moving money in the FYDP (03 & out) is called Zero Based Transfer (ZBT) TRANSITION: What happens to funds that are no longer available for obligation? To answer that we have to revisit appropriation life. Lesser of + $2 M + 25 % No Specific Congressional Restriction MILCON Project 5 Years Reference Sources: DoDFMR 7000.14-R, Volume 3, Chapter 6 (Sep 2015) and Chapter 7 (Mar 2011)

Appropriation Life Cycle   Years  1 2 3 4 5 6 7 8 9 10 11 O&M RDT&E Procurement Ships MILCON MILPERS Current Period: Available for new obligations, obligation adjustments, expenditures, and outlays Expired Period: Available for obligation adjustments, expenditures, and outlays Cancelled: Unavailable for obligations, obligation adjustments, expenditures, and outlays