1. BUSINESS CASE ANALYSIS (BCA) & TOOL Certified Professional Logistician
DEPOT AND ITEM LEVEL
BUSINESS CASE ANALYSIS (BCA) & TOOL
Bernard Price
Certified Professional Logistician
This topic will focus on depot and item level Best Value Analysis (BVA) and Business Case Analysis (BCA) concepts. Another useful tool recently developed by Communications-Electronics Life Cycle Management Command (C-E LCMC) Systems Analysis Division that aids in these analyses will be introduced. Additionally, some example depot level maintenance analyses in a Performance Based Logistics context will be summarized under this topic.

2. Depot Level Best Value Analysis (BVA)
Source of Repair Analysis (SORA) to Determine If Items Should be Repaired by Contractor Depot, Organic Depot or Use Other Options
Compares Net Present Value Cost of Each Alternative in Areas where Costs Differ to Achieve the Same Ao Performance
Typically Determines Whether Organic Repair Recurring Savings Will Exceed Investment Costs Necessary to Have Organic Repair
A Depot Level Best Value Analysis (BVA) is supposed to be performed after a Core Depot Assessment occurs and the assessment decides that core depot maintenance does not apply to the equipment. A depot level BVA is essentially a Source of Repair Analysis (SORA) that determines whether it is more cost effective to have depot level repairable items repaired by contractor depot, organic depot or use some other option. Other options may include throwing some items away or extending a favorable warranty on the equipment.
Best value analysis may compare the net present value cost of each alternative in areas where costs are different in achieving a similar Ao level of performance. When computing the cost differences between using organic depot support and contractor depot support, there will likely be some initial and recurring cost differences. Typically, organic depot support costs more initially, but its recurring costs over time tends to be less. Therefore, a Depot Level BVA tends to determine whether the recurring cost savings associated with Government repair over the expected life of the depot level repairable item will overcome its greater initial costs.

3. Potential Depot Level BVA Initial Cost Differences
Initial Spares (if new system & depot level logistics response times are different)
Special TMDE, Test Fixtures/Modules/Software & Test Program Sets/Interconnect Devices
Drawings, Repair Documentation & Cataloging
Other Initial Set Up Costs for Repair
This chart lists some of the potential depot level Best Value Analysis (BVA) initial cost differences. The initial spares to achieve an Ao goal will be different if there are logistics response time differences and the initial provisioning of sparing has not been fully accomplished.
In some cases, the Government may have to buy and maintain special Test, Measurement and Diagnostic Equipment (TMDE) usable only on the equipment being acquired. The Government may also need to buy test fixtures, test modules or test software. Additionally, test program sets and interconnect devices may need to be developed and maintained. Direct purchase of test equipment by the Government may not be necessary when using a contractor depot for repair.
Also, in some cases, the Government may have to buy drawings or repair documentation or catalog more items when an organic depot is to be used for repair.
Finally, there may be other different non-recurring, initial set up costs to accomplish repairs at the different facilities. This may especially be applicable to a contractor facility if the contractor did not build in the investment as part of its cost per repair.

4. Potential Depot Level BVA Recurring Cost Differences
Contractor & Organic Depot Repair Costs
Common TMDE Use & Special TMDE/TPS Maintenance
Inventory Holding Costs (if initial sparing differences)
Replenishment Spares (if washout rate differences)
Transportation & Handling Costs
Additional Integrated Materiel Mgt Support Costs
This chart lists some of the potential depot level BVA recurring cost differences. The recurring costs for contractor repair are taxpayer costs based on a fixed cost per repair or labor time and material costs expended per repair. Therefore, organic depot repair costs are similarly activity based time and material costs to the taxpayer. Common TMDE use time relative to its potential useful life, if not part of the labor and overhead costs, are also recurring costs. Annual maintenance costs for special TMDE, Test Program Sets or test software are also recurring costs. If contractor and organic depot logistics response times are different creating different initial sparing, then inventory holding costs will also be different.
Throwing an item away negates the need to repair it, but creates a need to replace it. Replenishment spares costs differ when item washout rates are different. Transportation costs may be different if the modes of transportation used or handling costs to ship the items are different.
Additional integrated materiel management support costs are associated with the personnel supporting the equipment, but not with the direct repair of the items. Any organic personnel labor costs savings associated with full contractor support or any contractor personnel savings associated with full organic support should be computed as an equipment level cost that may influence an all contractor repair or all organic repair decision.

5. Types of PBL Business Case Analysis
Best Value Analysis – Rates & Weights Multiple Factors to Evaluate the Benefits & Cost of Each Alternative (Source Selections & Pre-MS B)
Logistics Support Optimization Analyses –Lowest Net Present Value Total Cost among Support Alternatives to Achieve the Same Ao (Pre-MS C)
Economic Analysis - Evaluates the Return on Investment of an Alternative to Status Quo (After Design Frozen or Level of Repair Established)
This slide lists some types of Best Value Analysis (BVA) or Business Case Analysis (BCA) methodologies applicable to Performance Based Logistics (PBL).
A typical BVA weights and rates multiple performance factors to evaluate the benefits and compare with the cost of each alternative. This type of BVA is used in competitive source selections and potentially useful for BCAs prior to Milestone B.
Logistics Support Optimization analyses apply models using a consistent quantitative basis of comparison. It determines the lowest net present value total support cost among supply and maintenance level alternatives to achieve a similar Ao performance level. All costs are based on Activity Based Costing estimates associated with equipment reliability, maintainability and support efforts. This optimization provides the Taxpayer perspective rather than User perspective of total support costs. This type of BVA is recommended for BCAs after Milestone B and before MS C when item level data becomes available.
An economic analysis evaluates the net present value costs of both the status quo and a proposed improvement in areas where the costs will differ. A key outcome of an economic analysis is the Return On Investment (ROI) associated with the improvement. A high ROI ratio describes a candidate improvement worth funding to lower Total Ownership Cost. Economic analyses typically occur after the equipment design is frozen, but may be used in a Depot Level Source of Repair Analysis after the level of repair is established.

6. True Business Case Analysis
Sometimes Goes Beyond an Economic Analysis
Generally Multiple Alternatives
May Optimize Among Alternatives
Sometimes Goes Beyond a Best Value Analysis (BVA)
When a Larger Investment Reduces Recurring Costs
Considers Return on Investment (ROI) and Amount of Investment in the Decision Process
Example – Depot & Item Level SORA
Sometimes a BVA is a Business Case Analysis
When a Smaller Investment Cost Reduces Recurring Costs to Meet Ao Performance Goal
Example - Sparing to Availability Before Buying
Business Case Analyses (BCAs) are sometimes different that Best Value Analyses (BVAs). When practical, a BCA is often like an Economic Analysis because a BCA is interested in the Return on Investment (ROI), which is part of the risk assessment for investing money. However, like a BVA, a BCA may analyze multiple alternatives and also optimize among the alternatives.
Sometimes, a BCA recommendation may be different than a BVA recommendation. When a larger investment reduces recurring costs, a BCA will consider the ROI and the amount of investment in the decision process. A depot and item level Source of Repair Analysis (SORA) is an example where recurring cost savings may overcome the larger investment costs.
Sometimes a BVA is a BCA. When a smaller investment cost also reduces the recurring costs to meet an Operational Availability (Ao) performance goal, a Best Value Analysis and Business Case Analysis attain similar outcomes. Sparing to Availability before buying initial provisioning spares will often reduce total initial sparing costs. Having less spares also reduces recurring inventory holding costs too.

7. Depot & Item Level Analysis Tool
Depot Level Source of Repair Analysis at Both the Individual Item and Equipment Level
Determines Whether Organic Depot, Contractor Depot or Throwaway is Least Cost for Each Item
Optimal Item Level Mix plus Equipment Level Costs are Added & Compared to Determine if Mixed Repair is Still Less Than All Contractor or All Organic Repair
Public-Private Partnering Outcome Yields ROI of Each Item and Item Level Priority Ranking by Savings
Initial Sparing Results from 2 Separate COMPASS or SESAME Runs are Manually Inputted if Applicable
A Depot and Item Level Best Value Analysis (BVA) and Business Case Analysis (BCA) spreadsheet tool was developed by CECOM to apply when similar maintenance and supply chains apply to contractor and organic depot repair. The Depot and Item Level analysis is a depot level Source of Repair Analysis at both the individual item level and equipment level.
First, analyses of each depot level repairable item determines whether organic depot repair, contractor depot repair or a throwaway policy is the least cost alternative for each item. This formulates an optimum item level mix maintenance recommendation. Then, equipment level investment and recurring costs are added to the sum of applicable item costs within the equipment to compare and determine if the mixed repair alternative is still totals to less than the all contractor repair or all organic repair alternatives. Should the total cost for mixed repair remain less than all contractor or all organic repair, this will support a public-private partnering outcome. The tool will then yield the Return on Investment (ROI) of each item and rank order the items by their relative savings.
Since a depot level spreadsheet tool cannot determine retail initial sparing mix differences to achieve the same Operational Availability (Ao) level of performance, initial sparing results from two separate COMPASS or SESAME runs are manually inputted into the Depot & Item Level Analysis tool to capture initial provisioning and inventory holding cost differences.

8. Depot Level Source of Repair Analysis Modeling Decision Tree
Repair Item Data Not Known
Logistics Cost Estimating Tool
Log Times Equal *
Repair Item Data Known
Depot & Item Level (DIL) Analysis Tool
New System
Repair Item Data Not Known
Wait until repair item data is known
Log Times Different
Depot Level BVA
Repair Item Data Known
COMPASS** or SESAME with DIL Analysis Tool
Log Times Equal *
DIL Analysis Tool
Legacy System
This chart provides a decision tree for accomplishing depot level Source of Repair Analysis modeling. Should the logistics response times associated with contractor and organic depot support be similar, the same supply support sparing mix will achieve a similar Operational Availability (Ao) for both alternatives. This condition reduces the depot level analysis to become a spreadsheet cost comparison among alternatives using the Depot & Item Level Analysis tool.
A different Order & Ship Time from depot to the field, a different Retrograde Ship Time to depot from the field, or a different Turnaround Time for repair at the depot level will yield different sparing mixes and supply support costs to achieve the same Ao level of performance. Under these conditions, use of COMPASS or SESAME with the Depot and Item Level (DIL) Analysis tool is highly recommended. An advantage of using COMPASS is that the same data used to accomplish the Level of Repair Analysis earlier can be reused to accomplish the Depot & Item Level Source of Repair Analysis (SORA).
COMPASS, without the DIL Analysis tool, can perform Depot & Item Level SORA when the contractor repairs the removed item received from the field and returns the same serial number item back to the sender. Organic depot repair in COMPASS sends an item from depot level stock to the field and later repairs the removed item received from the field to replenish depot level stock. If contractor repair applies a similar logistics chain flow as organic repair, then two separate COMPASS or SESAME model runs are used to determine the sparing mix differences in attaining the same Ao.
Log Times Different
DIL Analysis Tool
* Equal Logistics Times consist of the Same Order & Ship Times from Depot to the Soldier, Same Retrograde
Shipment Times from the Soldier to the Depot, and Same Depot Turnaround Times from Receipt to Depot Stock
** COMPASS Standalone Run Can Compare Contractor Repair & Return of Same Serial Number to Government Depot Use of Wholesale Supply where Repairs Replenish Wholesale Supply

9. BEST VALUE ANALYSIS (BVA) & BUSINESS CASE ANALYSIS (BCA)
TO BLOCK I OF A TERMINAL
Applied Depot & Item Level Analysis Spreadsheet Tool
Analyzed Only Areas of Cost Differences
The Best Value Analysis (BVA) and Business Case Analysis (BCA) to Block 1 of a Terminal recently fielded is an example analysis that applied the Depot and Item Level BVA and BCA Spreadsheet Tool. The analysis with the spreadsheet tool only analyzed areas of cost differences among the alternatives. Since logistics response times associated with the contractor depot were similar to the organic depot alternative and initial provisioning had already occurred, costs associated with sparing were considered similar.

10. Total Organic Support Investment Costs
$ 2.035M Cost for Organic Depot Package
Initial Setup Allocated to System - $0.750M
$0.575M for Radio Portion
$0.175M for Rest of Terminal Block 1
$1.285M Allocated to Item Level Investment Costs
Organic maintenance support required some extra investment costs that were not part of contractor depot investment costs. Full organic support of every Depot Level Repairable item will require an investment of $2.035 million for the complete Organic Depot Package. Initial Setup Costs allocated to higher indenture level equipment summed to $0.75 million with $0.575 million needed for the Radio portion and $0.175 million for the rest of the Terminal. This left $1.285 million of investment costs directly related to depot level repairable items.

11. Detailed Organic Investment Costs
ITEM
Tech Doc
Software
Training
Test Fixtures
Program Office
Other Than
Total Cost
$500,000
Tech Doc
Terminal Initial Setup
$75,000
$100,000
$175,000
$175,000
LRU
Radio $0
$500,000
$25,000
$50,000
$575,000
$575,000
Mast Assembly $0 $0 $0
Antenna, DF
$75,534 $0
$75,534
Antenna Mo
$13,815 $0
$13,815
LPU
$13,610
$50,000
$50,000
$63,610
CSIU
$30,140
$50,000
$50,000
$80,140
PSIU
$38,915
$5,000
$50,000
$55,000
$93,915
SCU
$18,005
$5,000
$50,000
$55,000
$73,005
DCB
$19,339 $0
$19,339
Tango Box
$13,230 $0
$13,230
T-FOG Sensor
$49,873 $0
$49,873
Odometer Sensor
$2,037 $0
$2,037
W1 Cable
$12,651 $0
$12,651
MA715A
$6,664 $
25,000
$12,500
$37,500
$44,164
MA-445C
$29,629 $
75,000
$12,500
$87,500
$117,129
Display
This chart provides the detailed breakdown of the organic support investment costs. The total investment cost of each item was used as their input value to the Depot and Item Level (DIL) Analysis tool. The right hand column of the table shows their total costs. The details in the rest of the table are what the production contractor originally envisioned to be the costs to set up a Government depot to accomplish hardware repairs. The technical documentation cost of $500 thousand was allocated to the Depot Level Repairable items based on item purchase costs.
The Radio LRU contains the first 7 SRUs listed, which are depot level repairable items. The Mast Assembly LRU contains the Mast Motor and Winch as depot level repairable SRUs.
$10,177 $0
$10,177
SRU
Panel, Control
$31,808
$75,000
$75,000
$106,808
Dual Processor
$7,466
$50,000
$50,000
$57,466
Demodulator
$16,464
$50,000
$50,000
$66,464
HF Receiver
$15,261
$75,000
$75,000
$90,261
VHF Receiver
$22,104
$75,000
$75,000
$97,104
Monitor Receiver
$28,583
$75,000
$75,000
$103,583
RF Distribution
$7,819
$50,000
$50,000
$57,819
Mast Motor
$15,333 $0
$15,333
Winch
$21,542 $0
$21,542
$500,000
$510,000
$775,000
$150,000
$100,000
$1,535,000
$2,035,000

12. Major Recurring Cost Drivers
Organic Depot Labor Rate = $63.97/Hour
Contractor Repair Labor Rate = $131.87/Hour
Density = 83 Systems & 76 Systems Minimum
Item Life Cycle Minus 3 Years of Interim Contractor Support
The major recurring cost drivers in the analysis was the different fully loaded labor rates, the time to accomplish the repair of each item, the quantity of systems deployed, and the life cycle remaining on each item. The organic depot labor rate used was $63.97/hour. The contractor repair labor rate used was $131.87/hour. 76 systems have already been deployed, but the Project Manager feels that 83 systems will be the final deployment density. With an item life cycle minus 3 years for interim contractor support, 17 years of life is expected to remain on most items and 6 years of life will remain of some Depot Level Repairable items. The items with 6 years remaining are expected to be redesigned and swapped out when Block 3 of the Terminal is fielded.

13. BVA ITEM LEVEL RESULTS Radio (83 Systems) Cost Differences Only
The Best Value analysis item level results for the Radio assembly cost differences showed that all organic repair was the optimized mix and the $575,000 investment cost over and above the item level investment costs did not change the outcome because the optimized mix was still less that the contractor depot repair alternative.

14. BVA ITEM LEVEL RESULTS All Terminal Items (83 Systems) Cost Differences
The BVA item level results for all the Terminal Block 1 Depot Level Repairable items with 83 systems deployed is shown on this slide. The mixed repair alternative costs less than the alternatives for all organic depot repair or all contractor depot repair. One of the items was actually recommended to be thrown away instead of being repaired.

15. BVA ITEM LEVEL RESULTS All Terminal Items (76 Systems) Cost Differences
The BVA item level results for all the Terminal Block 1 Depot Level Repairable items with 76 Systems deployed showed similar outcomes, except for the front panel which switched from organic depot to contractor depot repair.

16. BVA RECOMMENDATIONS (Without Considering ROI)
The Best Value Analysis recommendations, without considering Return on Investment (ROI), are summarized in the table. Implementing the Depot and Item Level (DIL) Best Value Analysis recommendations listed is expected to yield the largest savings.
However, as you will discover, a DIL Business Case Analysis can alter a Best Value Analysis recommendation when a decision maker considers the amount of investment needed and the Return on Investment for that money.

17. BCA SUMMARY – SAVINGS / ROI Radio (83 Systems) Cost Differences Only
This chart summarizes the Business Case Analysis (BCA) savings and Return on Investment (ROI) associated with the Radio assembly for 83 systems deployed. Radio item level and higher indenture level investment costs totaled to about $1.1 million. Getting a Return on Investment of 1.16 over a 17 year period makes this large investment risky.

18. BCA SUMMARY – SAVINGS / ROI All Terminal Items (83 Systems) Excluding the Radio & With Cost Differences Only
This chart summarizes the BCA savings and ROI associated with all the Terminal Depot Level Repairable items for 83 systems deployed excluding the 7 SRUs in the Radio assembly. Results are rank ordered by cost differences between organic and contract depot repair. Of the 8 items recommended for organic repair, only the MA-445C had a high investment cost and the lowest ROI.

19. BCA SUMMARY – SAVINGS / ROI All Terminal Items (83 Systems) Excluding Low ROI with High Investment Costs
This chart summarizes the BCA savings and ROI associated with the Terminal Block 1 items recommended for organic depot repair that did not have high investment costs and a low Return on Investment. Getting an ROI of 1.63 with a small investment cost is less risky. Additionally, when only 7 of the 23 Depot Level Repairable items are recommended for organic depot repair, the $175,000 investment cost associated with the entire Terminal is expect to become less.

20. BCA RECOMMENDATIONS FOR 83 SYSTEMS (Considering ROI)
The Business Case Analysis (BCA) recommendations for 83 systems, which considered items that have a significant investment and a low ROI to be risky, are summarized in this table.
7 of the items originally recommended for organic depot repair in the Best Value Analysis were switched to a contractor depot repair recommendation in the BCA.

21. Radio R/T PBL Analysis
Looking at Possibility to Transition Radios to Organic Support
4.5% of Radios Presently Bought are DS Spares
Organic Support will Need Wholesale Level Spares
Want Radio Sparing Mix to Yield Same Ao Presently Attaining Under Contract Terms
Applied SESAME Model to Evaluate Ao & Spares
2 Years of Radio Return Data & Radio Time Phased Deployment Yielded Demand Rate
3% Consumption Rate from Washouts/Non-Returns
A limited Performance Based Logistics (PBL) analysis was applied to the a Radio Receiver/Transmitter (R/T). This radio has a much larger deployment quantity in the thousands. The analysis attempted to determine whether it was worthwhile to transition the Radio R/T maintenance process into some Government standard support process. About 4.5% of the Radios were bought or are being procured to be Direct Support (DS) level spares. If the Radio R/T was to transition to include some organic depot support, wholesale level spares will be needed. This analysis determined the Radio R/T sparing mix needed with standard support to yield the same operational availability (Ao) level of performance presently being attained under contract terms. The SESAME model was applied to evaluate the Ao presently being achieved and the sparing mix needed for the proposed alternatives to yield the same Ao. Two years of Radio R/T return data and the Radio time phased deployments at the beginning and ending of each year yielded the demand rate used in the analysis. A 3% consumption rate was also used in the analysis to replenish washouts from the items returned and replenish the items not returned for repair.

22. RADIO STATUS QUO REPAIR & RETURN OF SAME ITEM
30 days
Contractor
Supply
Support
3 days
Contractor
Maintenance
User DS
2 days
Floats
Under the terms of the present contract, the Radio R/T status quo support process involves the repair and return of same item. The spares at the Direct Support (DS) level are used to restore the Radio. From the time a spare leaves DS stock to the time that the same serial numbered item is repaired and returned to DS stock, about 38 days have elapsed. Therefore, an average Order and Ship Time (OST) of 38 days was used in the SESAME analysis. Due to the repair and return concept, depot level Radio R/T spares are not needed to cover the 35 day Repair Cycle Time at depot.
RCT of 35days
OST of 38 days
3 days

23. STANDARD SUPPORT PROCESS ALTERNATIVE 1 – Supply at Contractor
30 days
Contractor
Depot
Maintenance
Contractor
Depot
Supply
12 days DS
User
2 days
Floats
Auth. to Repair
30 days
Authorization to Release
1 day
Alternative 1 of the Standard Support Process requires the Government to purchase Radio R/T spares for supply at the Contractor’s depot. A different serial numbered item can now be used to replenish Direct Support (DS) level stock. If the spare is in contractor depot level supply, it will take about a 4 day Order and Ship Time (OST) from the time of requisitioning the spare to the time of receiving the spare at DS. However, since the depot level is expected to be at an 85% stock availability, 15% of the requisitions are expected to be back orders. Our experience in filling back orders is about 30 days. 15% times 30 days to fill back orders yields an additional 4.5 days delay time, which is added to the OST. Although the Contractor Maintenance Depot has a 30 day turn around time in repairing the Radio R/T, the contractor now has to wait for the Government’s authorization to accomplish repairs. Therefore, depot level pipeline spares are needed to cover an estimated 60 day Repair Cycle Time (RCT) at depot.
RCT of 60 days
OST of 4 days
CECOM
LRC +
85% Stock Availability
30 Days to Fill Back Orders
3 days

24. STANDARD SUPPORT PROCESS ALTERNATIVE 2 – Organic Depot Supply
30 days
Contr.
Depot
Maint.
Organic
Supply
Depot
12 days
Organic
Depot
3 days
3 days
User DS
2 days
Floats
Authorization to Release
1 day
Auth. to Repair
30 days
Alternative 2 covers the typical Government standard support process, which requires the Government to purchase Radio R/T spares for organic depot supply. If a spare is in Organic Depot Level Supply, the Army’s experience is to have a 10 day Order and Ship Time (OST) for non-priority requisitions. Due to the 85% stock availability and 30 days experienced in filling back orders, and additional 4.5 days delay time is essentially added onto the OST. In Alternative 2, the failed Radio R/T is first shipped to the organic depot as part of total asset visibility in the standard system. After the Government authorization to accomplish repairs is given, the unserviceable items are shipped to the Contractor to be repaired. After contractor repair, the serviced items are then shipped back to Organic Depot Supply. This yielded an estimated 66 days Repair Cycle Time (RCT) at the depot level to supply.
CECOM
LRC
RCT of 66 days
OST of 10 days +
85% Stock Availability
30 Days to Fill Back Orders
9 days

25. Fielding of Radios
The Radio fielding schedule is shown on this slide. The units showing Year Number 1 on the last column have already been fielded. Future fieldings are represented by Years (Numbers 2 through 4) floats or spares at Direct Support out of 9086 items fielded or to be fielded represent the 4.5% spares bought or to be purchased. Under the current repair and return contract terms, most units are experiencing a 99.96% operational availability.

26. Alt. 2 Sparing Recommendations
This chart covers Alternative 2 sparing recommendations to achieve the same operational availability being experienced. Only 145 of the 413 Direct Support (DS) level spares will be needed with the Alternative 2 logistics chain. However, 119 Radio R/T spares will be needed at the depot level to cover the expected Repair Cycle Time. This leaves 149 spares that can also be reallocated to depot to cover the consumption of spares expected from the 3% consumption rate. Over the next 5 years of time phased deployments, 87 Radio R/Ts are expected to be consumed rather than repaired. Since the steady state consumption rate is about 20 Radio R/T per year, the full reallocation of spares is expected to cover the repair pipeline at depot plus 8 years of consumption spares.

27. Comparison of Major Cost Drivers
Alternative 1 Further Reduced Total Sparing by 20 Radio R/Ts (8 at DS & 12 at Depot Level)
Alternative 2 Has Less Recurring Personnel
Dedicated Contractor Personnel Likely with Alternative 1 & Status Quo
Part Time Personnel Likely with Alternative 2
Alternative 2 Recommendation Saves Taxpayer $4.47 million (149 x $30,000) in Future Replenishment Buys to Achieve the Same Ao
268 Less Total Spares at DS Level
119 More Spares to Cover Depot Repair Cycle Time
149 Spares Available Covers 8 Years Consumption
The major cost driver differences among alternatives are in the areas of sparing and personnel costs. In the comparison of major cost drivers, contractor depot supply under Alternative 1 can further reduce total sparing by 20 Radio R/Ts. 8 less spares will be needed at the retail level and 12 less spares are needed at the wholesale level. However, Alternative 2 is expected to have significantly less recurring personnel costs. With full-time maintenance for the status quo and full time supply obligations with Alternative 1, dedicated contractor personnel are likely to occur with Alternative 1 and the status quo. Only part time Government and contractor personnel are likely needed with Alternative 2. Alternative 2 sparing recommendations are expected to save the taxpayer $4.5 million in future replenishment spares buys to achieve the same Operational Availability (Ao) as the status quo total spares can be reallocated from the DS level to cover the 119 pipeline spares needed for the depot level Repair Cycle Time. Alternative 2 leaves 149 spares to be available to cover about 8 years worth of spares consumption.

28. Terminal Depot Level PBL Analysis
Terminal Buys Have 10 Year Warranty & Life Cycle is Expected to be 15 Years
Contract Order & Ship Time (OST) Required to be 3 Days within CONUS from Order Placement
Contractor Covers Shipping Costs Both Ways
Contractor Provides Packaging with Pre-Paid Shipping
Contractor or Govt Depot Repair have Longer OST & Requires Purchase of Depot Stock
Ao Requirement of 97%
Another depot level Performance Based Logistics (PBL) analysis was performed on another new Terminal. Under the terms of the production contracts, Terminal buys have a 10 year warranty and the life cycle is expected to be 15 years before being replaced by other terminals. Under the terms of the warranty, the contractor’s Order and Ship Time (OST) requirement is 3 days within the Continental United States (CONUS). OST is from the time the order is placed to the time the spare item is received at the forward support location.
To help expedite retrograde shipping, the contractor covered the shipping costs both ways and the contractor provided packaging with pre-paid shipping. Under a standard organic support process, the contractor depot or organic depot will have a longer OST and require the purchase of depot level stock. An Operational Availability (Ao) requirement of 97% was established for the new Terminal.

29. Depot Level PBL Analysis Results
Presently No Retail Spares Needed Within CONUS to Achieve 97% Ao
Government Spares Under Warranty is Minimal to Cover OCONUS & Out of Warranty Claims
Contractor or Government Depot Repair Costs are Significantly Less Than Additional Spares Buy & Associated Inventory Holding Costs
Since a Warranty Extension Saves Government Shipping Costs & Buying Many Spares to Achieve Ao, It is Likely to be Cost Effective
The new Terminal depot level PBL analysis results showed that under the terms of the contract warranty, no retail spares within CONUS are needed to achieve the 97% Ao. Also, Government spares under the warranty is minimal to cover support Outside the Continental United States (OCONUS) and out of warranty claims. Contractor depot or Government depot repair costs for 5 years were computed to be significantly less than the cost for purchasing additional spares need to achieve the 97% Ao. The associated inventory holding costs for these additional spares makes this cost difference even greater. Since a warranty extension saves Government shipping costs and precludes buying many spares to achieve the established Ao, it is very likely to be cost effective. The Project Manager accepted the recommendation to pursue a warranty extension.