Division Director, O&S Cost Analysis O&S Cost Estimating 13 January 2015 Division Director, O&S Cost Analysis OSD CAPE Cost Assessment
Agenda Introduction to WSARA 2009 & CAPE Law and Policy O&S Cost Estimating Guide O&S Cost Data O&S Cost Estimate Use JSF Example GCV Example Summary
WSARA & CAPE Weapon Systems Acquisition Reform Act of 2009 Appointment of a Director of Cost Assessment and Program Evaluation (CAPE), who will communicate directly with the Secretary of Defense and Deputy Secretary of Defense, and issue policies and establish guidance on cost estimating The Director, CAPE is the principal staff assistant to the Secretary of Defense for Cost Assessment and Program Evaluation. The Director's principal responsibilities include:* Analyze and evaluate plans, programs, and budgets in relation to U.S. defense objectives, projected threats, allied contributions, estimated costs, and resource constraints. Review, analyze, and evaluate programs, including classified programs, for executing approved policies. Provide leadership in developing and promoting improved analytical tools and methods for analyzing national security planning and the allocation of resources. Ensure that the costs of DoD programs, including classified programs, are presented accurately and completely. Assess effects of DoD spending on the U.S. economy, and evaluate alternative policies to ensure that DoD programs can be implemented efficiently. Cost Assessment ASCAD - WSCAD EMAD - OSCAD (new) Program Evaluation
Law and Policy Compliance with Section 832 of the 2012 National Defense Authorization Act can be found in two main documents DoDI Interim 5000.02 (25 November 2013), Enclosure 10: Cost Estimating and Reporting. CAPE retain O&S cost data; estimates, supporting documentation and actual costs; and Military departments (MDs) retain all O&S estimates and supporting documentation MDs make periodic update of estimates with variance explanations MDs make full consideration of sustainment factors in early design stage 5000.04 update (in coordination). Detailed instruction for all cost estimating activities – including O&S Standard requirements for O&S data collection (VAMOSC revision as necessary) Standard requirements for collection of contractor support cost data Retention of VAMOSC data and estimates MDs collect and retain DT/OT R&M data and evaluations and use of such data for sustainment decisions MDs conduct independent logistic assessment prior to key acquisition decisions for identifying key cost factors and cost reduction alternatives Include reliability metrics and their drivers & adapt strategies for affordable cost MDs conduct periodic reviews of O&S costs after IOC to identify and address factors causing cost growth
O&S Cost Estimating Guide O&S cost-estimating process (published March 2014) Uses of O&S cost information at milestone reviews Common data and analytic methods Cost Assessment review process Presentation formats with sample briefing charts Standardized cost terms and definitions Organized as a taxonomy (i.e., O&S cost element structure) Working with L&MR to synchronize with AT&L O&S Cost Management guide
O&S Cost Data: VAMOSC DoD 5000.04-M provides guidance for VAMOSC data systems (being updated – will change to a DoDI) Establishes requirement for historical data collection system that supports well-defined, standard presentation formats for all major fielded systems Flexible level of detail (platform, subsystem, component) CAPE provides policy and conducts oversight Military departments are allowed considerable latitude in implementation Army: OSMIS Navy: Navy VAMOSC Air Force: AFTOC Naval VAMOSC Study underway to ensure it is the authoritative source for O&S Cost Data
O&S Cost Data: Cost & Software Data Reporting (CSDR) CAPE collects cost data on O&S contracts via the CSDR System Actual costs incurred on DoD contracts Both prime contracts and subcontracts All contract types, including firm fixed price Reporting against the OSD standard O&S cost element structure defined in O&S Cost Estimating Guide Labor and materials Number of units Contract profit/loss or fee and G&A CAPE’s Defense Cost and Resource Center (DCARC) office administers the CSDR policy It is the PM/PSM’s responsibility to put the CSDR requirement on contract
O&S Cost Data: PM’s role in CSDRs PM/PSM must contact DCARC office ~ 6 months before the RFP to initiate CSDR planning process PM/PSM and DCARC will develop contract-specific CSDR plan, CDRLs, and SOW language for RFP PMs/PSMs are responsible for putting the requirement on contract and ensuring contractor fulfills contractual requirement DCARC POC: Ms. Sandi Enser Sandra.B.Enser.ctr@mail.mil, 571-372-4272.
Uses of O&S Cost Estimates Stage Focus MS A Enhanced visibility of O&S costs and key cost drivers Support to trade-off studies Support to Analysis of Alternatives MS B Early influence on system design Adequate attention and investment in logistics engineering efforts Support to Product Support Strategy analysis (aka Business Case Analysis) Organic versus CLS Goals for Performance Based Logistics, Reliability/Maintainability/Availability Establish benchmarks for subsequent assessment of performance over the life cycle MS C Track and assess current estimates relative to prior benchmarks Early use of T&E data Provide insights into sustainability shortfalls and help identify appropriate mitigation actions Update Product Support Strategy analysis Provide foundation for budgetary requirements (manpower, major O&M elements) FRP DR Early use of O&S cost actual experience Refine Product Support Strategy analysis Update estimates of budgetary requirements Post-IOC Assess and manage O&S trends for legacy systems Assess needs for continuing system improvements/modifications Assess funding adequacy
Sensitivity of JSF ICE TY $ Sensitivity Excursions CAPE conducted sensitivity excursions for several assumptions associated with the O&S cost estimate Changing assumptions generally increases annual costs but are relatively insignificant when compared to the issue of fleet affordability +10.7% +0.5% +6.4% +3.5% +1.4% +10.8% -2.1% -3.5% -2.5% - 4% 2% 0% 6% 8% 10% 12% F22 like MODS Reliability (20% decrease) Fuel Costs (+/ $1.00/gal) Core Repair Costs (3rd qtr v. LM rates) Personnel Costs (OSD indices + 1%) Partner Reduction (2 yrs & 2/3 buy) Reduced Manning (90% fill) Sensitivity Excursions (% change relative to CAPE O&S ICE) TY $
Actual cost of legacy O&S from VAMOSC in FY10 JSF Affordability O&S costs could exceed what DoD spent in FY10 to operate and sustain the legacy fleet beginning as early as 2017 –if cost growth above inflation (CGAI) is considered Legacy F-15C/D F-16C/D AV-8B F/A-18A-D Actual cost of legacy O&S from VAMOSC in FY10 FY10 $B
GCV Milestone A Cost Estimates US Army's GCV Program Downgraded To Study Project Jan. 18, 2014 - 03:45AM | By PAUL McLEARY | defensenews.com Recent OMA Chart highlighting GCV replacing Bradley WASHINGTON —Congress has cut $492 million from the White House’s request for the US Army’s Ground Combat Vehicle (GCV) program for fiscal 2014, effectively ending the program as a major acquisition initiative for the ground service. The White’s House’s original request was $592 million, which was winnowed to $100 million in the omnibus appropriations bill the Senate passed last week and sent to the White House for the president’s signature….. GCV Bradley Army To Sacrifice GCV To Stave Off ‘Creeping Hollowness’ By Sydney J. Freedberg Jr. on November 14, 2013 at 11:36 AM Army delays GCV program By Michael Hoffman Wednesday, January 23rd, 2013 11:49 am Army acquisition leaders moved Jan. 16 to delay its top modernization program, the Ground Combat Vehicle, in hopes of making it more viable in the face of expected defense budget cuts. GCV O&S would have caused significant growth in the Army’s Combat Vehicle Portfolio.
Summary We are working to improve O&S cost estimating O&S Cost Guide published March 2014 Data collection being improved O&S cost information being considered at all Milestone reviews and we are having an impact
BACKUPS
CSDR Policy References DFARS (Defense Federal Acquisition Regulation Supplement) Clause 252.234-7003 Clause 252.234-7004 Clause 242.503-2(b) DoDI 5000.02 Enclosure 1 Table 7 Establishes CSDR requirement for contracts greater than $50M DoDM 5000.04-M-1 Primary requirements document for the development, implementation, and operation of the CSDR system
Basic O&S Cost Estimating Structure for an Independent Cost Estimate (ICE) 1. Unit-Level Manpower 1.1 Operations 1.2 Unit-Level Maintenance 1.3 Other Unit-Level 2. Unit Operations 2.1 Operating Material 2.2 Support Services 2.3 Temporary Duty 2.4 Transportation 3. Maintenance 3.1 Overhaul of End Items 3.2 Depot-Level Reparables 3.3 Consumables and Repair Parts 3.4 Other Maintenance 4. Sustaining Support 4.1 System Specific Training 4.2 Support Equipment Replacement and Maintenance 4.3 Sustaining/Systems Engineering 4.4 Program Management 4.5 Information Systems 4.6 Data and Technical Publications 4.7 Simulator Operations 4.8 Other Sustaining Support 5. Continuing System Improvements 5.1 Hardware Modifications 5.2 Software Maintenance 6. Indirect Support 6.1 Installation Support 6.2 Personnel Support 6.2.1 Personnel Administration (Personnel Management, Acquisition of New Personnel, Individuals Overhead Accounts) 6.2.2 Personnel Benefits (Family Housing, Commissaries and Exchanges, Dependent Support Programs) 6.2.3 Medical Support 6.3 General Training and Education 6.3.1 Basic & Initial Skill Training 6.3.2 Professional Military Education 6.3.3 Other Professional and Skill Training
O&S Cost Data: Contractor Sustainment Cost Reporting DD Form 1921-4 was approved April 2012 Corresponding data item description (DID), DI-FNCL-81831, was approved May 2012 After eighteen months of implementing DD Form 1921-4, the following realizations have come to light: Little to no visibility into: Labor hours and dollars Overhead Material dollars Units Profit/Loss or Fee In order to collect desired data, CSDR plans implementing DD Form 1921-4 require many clarifying remarks Adds complexity to data preparation and validation Results in non-standard data reporting across programs and contracts Adding lower-level elements requires modification of DD Form 1921-4, resulting in non-standard format
O&S Cost Data: CSDR Implementation Collect sustainment costs using DD Form 1921 Use OSD standard O&S cost element structure as basis for CSDR reporting structure Add children to reporting structure where lower level detail is desired Roll up reporting structure if lower-level detail is not applicable and/or not needed Include summary elements (G&A, UB, MR, FCCM, and Profit/Loss or Fee) Collect functional data via a sustainment-specific 1921-1 (referred to as 1921-5 here out) Not all 1921-1 functional categories apply to sustainment efforts 1921-5 captures functions that span across O&S activities Obtain contract-specific definitions of effort against reporting structure via CWBS dictionary Reports required for each FY of appropriation