O&S Cost Estimating JHP Case Study 1 UNCLASSIFIED notional data for notional program

Purpose Using the JHP Use Case, portray the PSM’s role in the O&S Cost estimate. 2 UNCLASSIFIED notional data for notional program

O&S UNCLASSIFIED notional data for notional program 3 Operating and Support (O&S) Cost Sustainment costs incurred from the initial system deployment through the end of system operations. Includes all costs of operating, maintaining, and supporting a fielded system. Specifically, this consists of the costs (organic and contractor) of personnel, equipment, supplies, software, and services associated with operating, modifying, maintaining, supplying, and otherwise supporting a system in the DoD inventory. (CAPE O&S Cost Estimating Guide, March 2014) Does not include Disposal costs. Contains multiple appropriations (not just O&M). Disposal Cost Life Cycle Cost O&S Cost Ownership Cost Acquisition Cost Figure not to scale

Additional Terms Will Cost vs Should Cost Will Cost is an estimate based on historic data and defined methodologies that allows creation of a budget; Should Cost is an estimate based on ideas to reduce the Will Cost UNCLASSIFIED notional data for notional program 4 Affordability Affordability Analyses: – how much money is available to pay for a certain capability – focus on a portfolio of platforms – conducted at the PEO level or more likely by the G8/A8/OPNAV communities. Affordability Constraints: – Represent the maximum that can be spent within the budget and current priorities – Goal is set at MS A – Cap is set at MS B APB Threshold/Objective Objective typically set based on the current O&S Cost estimate or by specific ADM direction Threshold value is 10% more than objective

JHP MS A O&S Estimate 5 UNCLASSIFIED notional data for notional program JHP is estimated to cost less than the HH-66, and the cost per aircraft is less than the established O&S Affordability Goal. O&S Affordability Goal

Updating at MS B O&S cost estimators update their estimates at each milestone, based on the best data and assumptions available. How do they get this information for O&S? – Cost Analysis Requirements Description (CARD) – Life Cycle Sustainment Plan (LCSP) – Manpower Estimate Report (MER) – Design documents – OEM information – Antecedent Actuals/History (VAMOSC/AFTOC/OSMIS) – Participating in the PSM’s working groups – Other program documentation UNCLASSIFIED notional data for notional program 6 PSM’s have a vital role in the creation of each O&S cost estimate: providing data and plans and validating necessary assumptions.

Estimate changes from MS A to MS B 7 UNCLASSIFIED notional data for notional program The MS B O&S cost estimate exceeds the O&S Affordability Goal established at MS A.

What’s next? Based on the MS B O&S estimate, JHP has exceeded its O&S Affordability goal set at MS A. What O&S Affordability Cap should the program recommend for MS B? a)Easy, just make the Affordability Cap match (or slightly exceed) the new estimate. b)It should remain at the level of the Affordability Goal and Should Cost initiatives implemented to reduce the expected O&S cost. c)The program should work with the PEO and A8 to determine the value that is affordable within the budget projections and the priority of the JHP against other assets in the portfolio. 8 UNCLASSIFIED notional data for notional program In this case, no additional budget is projected to be available for the JHP O&S. The program has been directed to develop Should Cost initiatives to reduce the O&S Cost.

MS B O&S Estimate 9 UNCLASSIFIED notional data for notional program The O&S cost estimate can help to identify cost driving categories, but deeper analysis is required to determine the cost driving element. The PSM is vital to determining the cost driving elements and developing meaningful Should Cost initiatives.

Tracking O&S Costs through the DAB charts 10 UNCLASSIFIED notional data for notional program “Sand” Chart “Spruill” Chart “Quad” Chart Portfolio Data Data O&S Data DRAFT “O&S Spruill” Chart (DRAFT)

Questions? UNCLASSIFIED notional data for notional program 11

BACKUP UNCLASSIFIED notional data for notional program 12

JHP MS A O&S Estimate Pareto 13 UNCLASSIFIED notional data for notional program

WEATHER WARNING Potential is high for low pressure system to produce wintry mix (snow/sleet) Wednesday morning (0400L – 1200L). Hazardous conditions with the morning commute Check DAU Operating Status – (see upper rt corner ‘operating status’ – Option 1 UNCLASSIFIED notional data for notional program 14