Cost-Benefit Analysis Training: APS Case Study (cont’d) Show Slide #1: America’s Army: The Strength of a Nation Facilitator’s Note: Cost-Benefit Analysis Training: APS Case Study (cont’d)

Reporting Results You return to your senior leader to report the results of your CBA Senior leader provides new information Funding for new military construction (MILCON) is available POM/Budget cost should reflect budget offsets (existing spending authority) Resale value of LAMS should be considered How do you respond? Show Slide #2: Reporting Results Facilitator’s Note: Activity Step 2 Identify key elements of information from case study data You return to your senior leader to report the results of your CBA Senior leader provides new information Funding for new military construction (MILCON) is available POM/Budget cost should reflect budget offsets. That is, we want to report the additional funding needed beyond what has already been authorized by Congress. Hint: Subtract already authorized funding from total cost. Resale value of LAMS should be considered How do you respond? (After “Yes Sir”, that is!) In fact, one of the major benefits of CBA is that gaining understanding of costs and benefits tends to generate new alternatives. Recall the example from theater of shipping goods through Kuwait and Jordan. The information generated through CBA brought a new option to light: use the cost information as leverage to negotiate a lower price to ship through Jordan, while gaining additional geo-political benefits. This is one example of why the process is not strictly linear. In order to have the best value proposition, the new information should be incorporated into the CBA. That will be our next activity.

Terminal Learning Objective Action: Apply Army Cost Benefit Analysis to a More Complex Scenario Condition: You are training to become an ACE with access to ICAM course handouts, readings, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors. Standard: With at least 80% accuracy: Identify key elements of information from case study data Prepare CBA briefing including Executive Summary Show Slide #3: TLO Facilitator’s Note: Read the TLO verbatim to the students Action: Apply Army Cost Benefit Analysis to a Simple Scenario Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy: Review the Army 8 Step Cost Benefit Analysis process Identify key elements of information from case study data Enter relevant scenario data into macro enabled templates to calculate cost data, and inform managerial cost decisions

Case Study Assignment Divide into teams of 4 or 5 Read the Army Prepositioned Stocks (APS) case study Prepare a Cost Benefit Analysis using the additional information given Address each of the eight steps and identify any changes to each as a result of the additional information New facts and assumptions; quantifiable and non quantifiable benefits; decision criteria, etc. Include COAs 1-3 from the previous case Include LAMS resale value in COAs 1 and 2 Prepare a cost estimate for the new COA (MILCON) Prepare one slide for each of the eight steps according to the templates provided Present your Executive Summary slide to the class Be prepared to answer the CBARB’s (class) questions Show Slide #4: Case Study Assignment Facilitator’s Note: Read the Army Prepositioned Stocks (APS) case study Prepare a Cost Benefit Analysis using the additional information given Address each of the eight steps and identify any changes to each as a result of the additional information New facts and assumptions; quantifiable and non quantifiable benefits; decision criteria, etc. Include COAs 1-3 from the previous case Include LAMS resale value in COAs 1 and 2 Prepare a cost estimate for the new COA (MILCON) Prepare one slide for each of the eight steps according to the templates provided Present your Executive Summary slide to the class Be prepared to answer the CBARB’s (class) questions

Cost Benefit Analysis U. S Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 1: Define and scope the problem/opportunity: Show Slide #5: Cost Benefit Analysis U.S. Army Eight Step Process Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process. 5

Cost Benefit Analysis U. S Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 2: Formulate assumptions and constraints: Show Slide #6: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process. 6

Cost Benefit Analysis U. S Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 3: Define various Courses of Action: COA #1 COA #2 COA #3 COA #4 APS Site COAs Show Slide #7: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process.

Cost Benefit Analysis U. S Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 4: Develop Quantifiable and Non-Quantifiable Cost estimate for each Course of Action: (see calculation chart for computations) COA #1 COA #2 COA #3 COA #4 QUANTIFIABLE COST POM/Budget FY10-FY17 QUANTIFIABLE COST (Life Cycle) FY10-FY34 NON-QUANTIFIABLE COST (POP/Budget) NON-QUANTIFIABLE COST (Life Cycle) Show Slide #8: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process.

NON-QUANTIFIABLE BENEFIT Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 5: Identify Quantifiable and Non-quantifiable Benefits for each Course of Action: (see calculation chart for computations) COA #1 COA #2 COA #3 COA #4 QUANTIFIABLE BENEFIT . NON-QUANTIFIABLE BENEFIT Show Slide #9: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process.

Cost Benefit Analysis U. S Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 6: Define Courses Of Action selection criteria: Show Slide #10: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process.

Use Excel Decision Matrix Cost Benefit Analysis U.S. Army Eight Step Process “Army Pre-Positioned Stock (APS)” Step 7: Compare Courses Of Action: Use Excel Decision Matrix Show Slide #11: Cost Benefit Analysis U.S. Army Eight Step Process (Cont.) Facilitator’s Note: Main point of slide: Provide student with worksheet template to assist in developing the response to each of the Eight Steps in the Army CBA process.

Step 8 – Report Results and Recommendations Decision package must present a strong value proposition. That is, it must clearly show that the benefits of the recommended COA more than justify the costs and risks. Show Slide #12: Step 8 – Report Results and Recommendations Facilitator’s Note: Activity Step 2 Identify key elements of information from case study data The decision package must present a strong value proposition. That is, it must clearly show that the benefits of the recommended COA more than justify the costs and risk. The next slide includes a template for the Executive Summary slide. The CBA Guide, available at the Cost & Performance Portal, includes a narrative report for the APS example.

Step 8: Report Results and Recommendations Executive Summary (Template) Be concise as this information should fit on one slide! Brief background and problem statement Brief description of methods (how many COAs evaluated, etc.) Resource requirements (existing or additional). Recommendation: Brief description of COA chosen and brief explanation of reasoning (costs vs. benefits). May refer to decision criteria here. Cost to implement recommended COA: FY 12-14: POM (FYs 12-19): Life Cycle (FY12-FY36): Show Slide #13: Step 8 – Report Results and Recommendations (Cont.) Facilitator’s Note: Activity Step 2 Identify key elements of information from case study data The preferred reporting method is a written narrative. Examples may be found in The CBA Guide, available at the Cost & Performance Portal, includes a narrative report for the APS example.

Instructor Support Materials: Step 8: Report Results and Recommendations Executive Summary The Army is required to update prepositioned stocks to respond to global contingencies, incorporating vehicles from Iraq. Three Courses of Action (COAs) were developed to determine the best way to update APS. All COAs require additional resourcing. Recommendation: Implement COA #2: Purchase Temporary Storage Facilities (LAMS) Least cost to the Army. Greatest benefit: provides greatest flexibility for providing assets on short notice; supports availability for contingencies; maintains highest quality vehicle response readiness for the least cost to the Army. Cost to implement COA 2: FY 12-14: $ 144.4M POM (FYs 12-19): $ 320M Life Cycle (FY12-FY36): $ 1,041M Show Slide #14: Instructor Support Materials: Step 8: Report Results and Recommendations Facilitator’s Note: Activity Step 2 Identify key elements of information from case study data The preferred reporting method is a written narrative. Examples may be found in The CBA Guide, available at the Cost & Performance Portal, includes a narrative report for the APS example.

Instructor Support Materials Additional materials: Solution to case study in narrative form DVD of CBA briefing by Ms. Cecile Batchelor Show Slide #15: Instructor Support Materials Facilitator’s Note: Additional materials: Solution to case study in narrative form DVD of CBA briefing by Ms. Cecile Batchelor

Terminal Learning Objective Action: Apply Army Cost Benefit Analysis to a More Complex Scenario Condition: You are training to become an ACE with access to ICAM course handouts, readings, spreadsheet tools, and awareness of Operational Environment (OE) variables and actors. Standard: With at least 80% accuracy: Identify key elements of information from case study data Prepare CBA briefing including Executive Summary Show Slide #16: TLO Summary Facilitator’s Note: Restate the TLO Action: Apply Army Cost Benefit Analysis to a Simple Scenario Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy: Review the Army 8 Step Cost Benefit Analysis process Identify key elements of information from case study data Enter relevant scenario data into macro enabled templates to calculate cost data, and inform managerial cost decisions Or”   Facilitator's at this time, have one learner from each group to explain the most important take away to them from this lesson. Facilitate a discussion on each answer.