OSD CAIG 1 Walt Cooper OSD Cost Analysis Improvement Group (CAIG) August 13, 2008 Weapon System Sustainment: Collection of Contractor Costs

OSD CAIG 2 Outline Background and purpose Current status Issues Next steps

OSD CAIG 3 O&S Costs Represent Largest Fraction of Life Cycle Costs, by Far RDT&E Procurement O&S

OSD CAIG 4 O&S Cost Analysts’ Major Responsibilities Preparation of life cycle cost estimates Formulation of budgets and programs Analysis of working capital funds Development of business case analyses Support of contract negotiations Success depends on analysis of actual O&S costs organized in a standard O&S Work Breakdown Structure (WBS)

OSD CAIG 5 The Source of O&S Actuals: Visibility and Management of Operating and Support Costs (VAMOSC) Only source of ready data on actual operating and support (O&S) costs of weapon systems Evolution –In 1974, Military Departments began developing programs for collection of actual O&S costs –Initial systems largely manual –In mid-1990s, Military Departments introduced automation Army OSMIS (Operating & Support Management Information System) Navy: Naval VAMOSC and USMC VAMOSC Air Force Total Ownership Cost (AFTOC) –Today, VAMOSC systems are state-of-the-art information systems with growing numbers of users Data provided in standard WBS

OSD CAIG 6 Today’s VAMOSC Program Army (OSMIS) Navy (VAMOSC) Air Force (AFTOC) Number of systems tracked Almost 1,500 1,800+ > 200 weapons, hundreds of sub-systems > 200 base operating accounts Data sources Active user accounts1, More than 2,500 active users across DoD.

OSD CAIG 7 An Illustration – The Navy’s F-18C ($M, FY 2005 constant) Historically, contractor support has represented a small percentage of O&S costs. But that is changing…

OSD CAIG 8 Current Trends Greater reliance on industry partners for sustainment –Many forms -- traditional Contractor Logistics Support (CLS), PBL, DVD –More use of public-private maintenance partnerships –Establishment of Product Support Integrators Industry supports sustainment of a growing number of aviation systems MRAP JPO relying extensively on industry for sustainment of MRAP in theater

OSD CAIG 9 F-22A O&S Costs (Then-year dollars in millions) Sources: AFTOC, AFMC 778 AESG/FM

OSD CAIG 10 Demand for CLS data is growing… top queries in FY 2008 for OSMIS

OSD CAIG 11 About The Project Objective: To recommend policy and procedures for collection of contractor costs in weapon system sustainment arrangements To be completed in FY 2009 Collaborative effort among the CAIG, OUSD (AT&L), and all military departments

OSD CAIG 12 Current Status Currently, numerous programs have proposed CSDR plans –Working these on a case-by-case basis –Plans map to O&S Cost-Estimating Guide WBS Long term –Establish formal regulatory requirements Draft DoDI establishes requirement for sustainment contract cost reporting AR (approved 26 Mar 08) requires program offices to provide O&S costs –Develop formats and procedures for collection Draft to be vetted with military departments this summer Will conduct workshops with selected program offices –Global Hawk (August 14) –JSTARS (August 15) –T-45 (August) –Stryker (?) Maintain dialog with industry

OSD CAIG 13 CSDR Sustainment Plans ProgramContractorStatus F-119 engine (F-22A)Pratt & WhitneyApproved Under contract week of 11 Aug 08; expected CY 2008 value of $215 million F-22A air vehicleLockheed MartinIn final review Expect to submit for approval week shortly; expected CY 2008 value is $653 million F-414 engine sustainment (F/E- 18E/F) General ElectricApproved Under contract; PoP: 1 Apr 2008 – 31 Dec 2010; contract value: $90 million F/A-18E/F Integrated Logistics Support BoeingApproved; undergoing mods to reflect contract changes Will be re-submitted shortly F-35Lockheed Martin, Northrop Grumman, BAE Approved Under contract

OSD CAIG 14 CSDR Sustainment Plans (Cont’d) ProgramContractorStatus StrykerGeneral DynamicsIn development Joint Cargo AircraftL-3Approved Under contract; PoP: 29 Aug 2007 – 29 Nov 2011; contract value: $2 billion C-5M RERP Interim Contractor SupportLockheed MartinIn development Light Utility HelicopterEADSApproved Data submitted V-22 Air Vehicle Joint PBLBell-BoeingApproved Will go under contract 1 st Qtr, FY 2009

OSD CAIG 15 Cost Analysts’ Desired Outcomes Periodic reports needed -- annual submissions preferred –To be used for updating budgets and programs, analysis of Working Capital Fund requirements –Consistent with VAMOSC system updates –However, must be synchronized with contract milestones Program and contract plans consistent with CSDR –O&S cost WBS –Other items, e.g, G&A, undistributed budget, fee Reports submitted directly to DCARC Subsequently sanitized and incorporated into VAMOSC systems

OSD CAIG 16 Issues to Address Protection of proprietary data Reporting frequency WBS/Level of detail Thresholds

OSD CAIG 17 Next Steps Continue to work with program offices on current plans Vet proposed standard formats and instructions with departments and industry Update cost-reporting appendix to DoD M, “Department of Defense Cost Analysis Guidance and Procedures Manual”