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?

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

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

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: 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: 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

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)

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

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:

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

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. 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):

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

Instructor Support Materials 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