1. Developed based on information provided by Mr. Mario F. Wozniak Chief, Reserve Personnel Army (RPA), Budget Division US Army Reserve Command G8 Author: Mr. William T. Huddleston, MSOR, MSME Army Cost Benefit Analysis A Case Study Battle Assembly Travel Reimbursement

2. A Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

3. Terminal Learning Objective 3 Author: William T. Huddleston, MSOR, MSME Government Management Institute © Task: Perform Army Cost Benefit Analysis Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy: Review the Army 8 Step Cost Benefit Analysis process Apply Cost Benefit Analysis to the Battle Assembly case

4. Army Reserve Command Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

5. Army Reserve Command Leadership A 3- star General leads the US Army Reserve Command and holds the following two titles: 1.Chief, Army Reserve (CAR): Reports to Chief of Staff of Army; represents Army Reserve in policy and planning discussions with Army, Department of Defense and Congress 2.Commanding General (CG) of the US Army Reserve Command (USARC): Reports to Army Forces Command; responsible for staffing, training and readiness of most Army Reserve units in continental US and Puerto Rico A 3- star General leads the US Army Reserve Command and holds the following two titles: 1.Chief, Army Reserve (CAR): Reports to Chief of Staff of Army; represents Army Reserve in policy and planning discussions with Army, Department of Defense and Congress 2.Commanding General (CG) of the US Army Reserve Command (USARC): Reports to Army Forces Command; responsible for staffing, training and readiness of most Army Reserve units in continental US and Puerto Rico

6. Army Reserve Command Mission Provide trained, equipped, and ready Soldiers and cohesive units to meet the global requirements across the full spectrum of operations. The Army Reserve is a key element in The Army multi- component unit force, training with Active and National Guard units to ensure all three components work as a fully integrated team. Responsibilities Operational tasks; training, equipping, managing, supporting, mobilizing, retaining Soldiers Troop Program Unit (TPU) Soldiers; Commands, controls, supports Army Reserve troop units CONUS. Exception: Psychological Operations and Civil Affairs units Ensures readiness of forces; prepares over 1,700 units to mobilize and deploy to wartime theater

8. Army Soldier Profile (FY09) 1,112,703 Soldiers

9. Travel reimbursement is an existing issue within the ARC. “Soldier reimbursement of travel expenses to a Battle Assembly (BA)” Travel reimbursement is an existing issue within the ARC. “Soldier reimbursement of travel expenses to a Battle Assembly (BA)” BA consist of monthly drills; soldiers practice military skills to maintain individual and unit readiness in case of mobilization and deployment Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

10. Case Study Overview Request initiated by US Army Reserve Command to: Extend National Defense Authorization Act (NDAA) to: Authorize travel reimbursement for “specified group” of Soldiers traveling to Battle Assembly outside normal commuting distance (>150 miles) especially; -Soldiers with critical Military Occupation Specialties -Soldiers affected by Base Realignment and Closure (BRAC) -Units with designated leader shortages Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

11. Army Reserve Command (ARC) request to reimburse travel related expenses is based on: -Impact on morale, and personal finance issues for AR soldiers -Increased recruiting and training costs associated with AR Soldiers lost through attrition -Adverse impact to Operational Readiness by loss of Soldiers in critically needed categories through attrition -ARC’s Continuous Improvement effort modeling (ARFORGEN) and minimize “cross leveling” Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

12. Travel reimbursement to ARC Soldiers’ required to travel more than 150 miles to BA is being considered for several reasons: -Maintaining competitive edge by providing more benefits and promotion opportunities for skilled AR soldiers -AR promotions require some reservists move to new units beyond normal commuting distance -Maintaining camaraderie with fellow Soldiers is highly valued in ARC -BRAC is increasing soldier travel distance for BA and this is expected to impact more reservists with additional base closures -Maintaining competitive edge by providing more benefits and promotion opportunities for skilled AR soldiers -AR promotions require some reservists move to new units beyond normal commuting distance -Maintaining camaraderie with fellow Soldiers is highly valued in ARC -BRAC is increasing soldier travel distance for BA and this is expected to impact more reservists with additional base closures Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

13. Assumptions: -Operational Readiness is a high command objective -ARC desires to support continuous improvement modeling (ARFORGEN’s enhancement is very important) -Economic conditions, promotions, Base Realignment and Closure (BRAC), and desire for Soldiers to stay in unit, result in increased number of soldiers traveling >150 miles to BA Assumptions: -Operational Readiness is a high command objective -ARC desires to support continuous improvement modeling (ARFORGEN’s enhancement is very important) -Economic conditions, promotions, Base Realignment and Closure (BRAC), and desire for Soldiers to stay in unit, result in increased number of soldiers traveling >150 miles to BA Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

14. Assumptions (continued): -Annual “out-of-pocket” Soldier expense is estimated between $500-$4,000 for travel to BA. Case will average travel expenses to Battle Assembly (BA) = $1,500 -Recruiting and training cost is estimated at $75,000 per Soldier -Operational Readiness is impacted when critically needed Soldiers leave service -Inflation rate 2% per year -Estimate travel reimbursement costs for 1 year and 10 years Assumptions (continued): -Annual “out-of-pocket” Soldier expense is estimated between $500-$4,000 for travel to BA. Case will average travel expenses to Battle Assembly (BA) = $1,500 -Recruiting and training cost is estimated at $75,000 per Soldier -Operational Readiness is impacted when critically needed Soldiers leave service -Inflation rate 2% per year -Estimate travel reimbursement costs for 1 year and 10 years Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

15. Assumptions (continued): -Army reserve staff level = 205,000 soldiers -5,000 AR soldiers are affected by BRAC; 2,500 or half of these soldiers are considered critical or skilled positions -50,000 AR soldiers travel > 150 miles to BA; 24,000 are considered critical or skilled positions -Predict current AR soldier attrition rate decrease 0.5% if critically needed Soldiers are reimbursed for travel -Not all AR soldiers will be reimbursed for travel expenses Assumptions (continued): -Army reserve staff level = 205,000 soldiers -5,000 AR soldiers are affected by BRAC; 2,500 or half of these soldiers are considered critical or skilled positions -50,000 AR soldiers travel > 150 miles to BA; 24,000 are considered critical or skilled positions -Predict current AR soldier attrition rate decrease 0.5% if critically needed Soldiers are reimbursed for travel -Not all AR soldiers will be reimbursed for travel expenses Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

16. The commander identified some non-quantifiable factors that could be considered in a CBA: Image to general public Soldier value perception Soldier home financial stability Soldiers’ morale is important Increased Operational Readiness ARFORGEN enhancement The commander identified some non-quantifiable factors that could be considered in a CBA: Image to general public Soldier value perception Soldier home financial stability Soldiers’ morale is important Increased Operational Readiness ARFORGEN enhancement Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

17. Cost Benefit Analysis (CBA) Review Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

18. What is Cost Benefit Analysis? A of comparing both and costs and benefits (positive/negative), against specified Courses of Action (COA) to determine the best. Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

19. What is Cost Benefit Analysis? A structured methodology of comparing both quantifiable and non-quantifiable costs and benefits (positive/negative), against specified Courses of Action (COA) to determine the best enterprise solution. Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

20. Why do we need a Cost Benefit Analysis? 1. 2. When making resourcing decisions: Treat cost (both near and long term) as an upfront consideration, not as an afterthought Obtain visibility of project value and positive and negative consequences to a decision path Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

21. Why do we need a Cost Benefit Analysis? 1. To make a better use of limited funds 2. When making resourcing decisions: Treat cost (both near and long term) as an upfront consideration, not as an afterthought Obtain visibility of project value and positive and negative consequences to a decision path Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

22. Army CBA 8 Step Process 1. Define and scope the problem/opportunity 2. Formulate assumptions and constraints 3. Define alternatives 4. Develop cost estimate for alternatives 5. Identify quantifiable and non-quantifiable benefits 6. Define alternative selection criteria 7. Compare alternatives 8. Report results and recommendations Case Study Overview Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

23. BB BENEFITS MUST BALANCE OR OUTWEIGH COST BENEFITS  The sum of quantifiable and non-quantifiable benefits:  Quantifiable benefits Cost avoidances  Non-quantifiable benefits Greater capacity Faster availability Better quality Improved moral Other COST  Quantifiable cost Direct Indirect Initial/Start-up Sustainment Procurement  Non-quantifiable Life/Safety/Health Perception/Image Opportunity Risk/Uncertainty Politic al COST  Quantifiable cost Direct Indirect Initial/Start-up Sustainment Procurement  Non-quantifiable Life/Safety/Health Perception/Image Opportunity Risk/Uncertainty Politic al 1.Define and scope the problem/opportunity 2.Formulate assumptions and constraints 3.Define alternatives 4.Develop cost estimate for alternatives 5.Identify quantifiable and non-quantifiable benefits 6. Define alternative selection criteria 7.Compare alternatives 8.Report results and recommendations Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

24. Battle Assembly Travel Reimbursement Case Study Team Exercise Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

25. Case Study Instructions Break up the class into 4 teams Each team is tasked to respond to all 8 steps of the CBA process. Time will be provided for the teams to discuss each process step. After team discussion, each team will present their findings. Break up the class into 4 teams Each team is tasked to respond to all 8 steps of the CBA process. Time will be provided for the teams to discuss each process step. After team discussion, each team will present their findings. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

26. Case Study Discussion Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 1. Define and Scope the Problem / Opportunity Questions for the Reviewer -Does the problem statement define a clear, unambiguous issue? As appropriate, does the objective reflect an enterprise perspective? -What major stakeholders are likely to be impacted? -Does the problem statement define a clear, unambiguous issue? As appropriate, does the objective reflect an enterprise perspective? -What major stakeholders are likely to be impacted?

27. Case Study Discussion Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 2. Formulate Assumptions and Constraints Questions for the Reviewer: -Are the assumptions realistic? Were they provided by an appropriate subject matter expert? Are the assumptions or facts structured in a way that favors one alternative COA? -Do the assumptions, and facts clearly identify the natural and/or artificial limits or expansions placed on the solution set? -Are the assumptions realistic? Were they provided by an appropriate subject matter expert? Are the assumptions or facts structured in a way that favors one alternative COA? -Do the assumptions, and facts clearly identify the natural and/or artificial limits or expansions placed on the solution set?

28. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 3.Define Alternative Courses of Action Questions for the Reviewer: -Have all feasible alternatives been considered, to include alternatives that represent creative thinking? -Have the alternatives been defined or described clearly, and to a sufficient level of detail to support the development of a cost estimate? -Is the status quo included, or is its absence explained? -Do the alternatives span a reasonably wide range of potential solutions?

29. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 4. Develop Cost Estimate for each Alternative Questions for the Reviewer: -Does the cost estimate span the appropriate life cycle? -As appropriate, does the documentation clearly differentiate between a cost-perspective estimate and a POM/budget- perspective estimate? -Are the cost estimates for each COA structured in a way that supports apples-to-apples comparison? -Is the cost estimate backed up by supporting documentation: -Data sources identified? -Rationale and methodology explained? -Analysts/POCs identified?

30. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 5.Identify Quantifiable and Non-Quantifiable Costs and benefits Questions for the Reviewer: -Do the perceived benefits reflect an enterprise perspective? -Are the benefits consistent with the problem statement?

31. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 6.Define Alternative Selection Criteria Questions for the Reviewer: -Are the selection criteria appropriately tailored to the problem statement or requirement? -Has appropriate consideration been given to both cost and non-cost criteria? -If weighting of selection criteria has been used, has the leader agreed with the weighting? -Do the selection criteria appear unrealistically skewed to favor one alternative?

32. BB BENEFITS MUST BALANCE OR OUTWEIGH COST $0 CostBenefit Alternative #1: No Travel Reimbursement No incremental benefits or costs A “Cost-Benefit Balance” Visual Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

33. Readiness BB BENEFITS MUST BALANCE OR OUTWEIGH COST Alternative #2: All Reservists Are Unquantifiable Benefits in morale and readiness worth $56M? $75M Cost Benefit Morale $19M A “Cost-Benefit Balance” Visual Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

34. BB BENEFITS MUST BALANCE OR OUTWEIGH COST Alternative #3: Critical & BRAC only Are Unquantifiable Benefits in morale and readiness worth $27M? $36M CostBenefit $11M $44M Morale Readiness A “Cost-Benefit Balance” Visual Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

35. BB BENEFITS MUST BALANCE OR OUTWEIGH COST Alternative #4: BRAC only Are Unquantifiable Benefits in morale and readiness worth $14M? $8M CostBenefit $2M Morale Readiness Army Cost Benefit Analysis Battle Assembly Travel Reimbursement A “Cost-Benefit Balance” Visual

36. Making a decision requires answering the questions on the previous slides How can you evaluate and compare the non-quantifiable costs and benefits? The Decision Matrix is one method of comparing alternatives Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

37. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 7. Compare Alternatives Questions for the Reviewer: -Does the analysis clearly demonstrate how the recommended COA best satisfies the selection criteria? -Is the recommended billpayer consistent with Army priorities? Do the benefits of the recommended COA justify the billpayer? -Are second- and third-order effects identified, and are the negative impacts acceptable?

38. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 8. Report Results and Recommendations Questions for the Reviewer: -Does the package contain all key elements, accompanied by supporting documentation? -Does the recommended COA address the problem, and is it consistent with the assumptions and constraints? -Does the analysis explain how the recommended COA is best at satisfying the selection criteria?

39. 39 Step 8: Report Results and Recommendations Executive Summary Problem: Brief description of methodology and number of COAs considered to determine the best menu choice. Existing or new funding? Recommendation: Cost to Implement: – $ – Other: Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

40. Battle Assembly Training Case Study Instructor’s Support Material

41. Length Time: 4h – Briefing 15-20 min, break out in teams to prepare each of the points average 10 min per point area, presentation and discussion average 15 min per point, wrap up 15-20 min. Process – Introduce the case – Break the class into groups of 4 – Each group needs to prepare material for presentation results – Use the excel templates as applicable Presentation – Discuss findings with participants and agree on main points to ensure that they are on the right truck – Introduce support for each point after students’ presentation Battle Assembly Training - Instructor’s Support Material

42. Objectives: Apply the CBA and by using it: bring out the issues at hand think though possible alternatives and support Point to the: -Ranking process, and -Weight sensitivity since these are the key areas influencing the decision -Realize the need for support for a cost informed decision Battle Assembly Training - Instructor’s Support Material

43. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 1.Define and Scope the Problem / Opportunity ARC soldiers are adversely impacted by having to pay travel costs to attend Battle Assembly. Compare costs and benefits of extending travel reimbursement to ARC Soldiers traveling to BA.

44. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 2. Formulate Assumptions and Constraints -Current law does not allow for reimbursement of Soldier travel to Battle Assembly -Limit travel reimbursement to soldiers traveling greater than 150 miles to BA -Estimate 50,000 Soldiers travelling to BAs are not reimbursed -24,000 of the 50,000 Soldiers have critical skills positions -Soldiers spend average $1,500 annually traveling to BAs -ARC Soldier attrition rate = 20% -Travel reimbursement can reduce ARC attrition by.5% -AR staff level = 205,000 Soldiers

45. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 2. Formulate Assumptions and Constraints -Economic conditions, Soldier promotions as well as BRAC increase travel distance to Battle Assembly -5,000 AR Soldiers effected by BRAC -2,500 Soldiers impacted by BRAC have critical skills -Annual training for new recruits averages $75,000 -Operational Readiness is extremely important -Soldier morale very important -ARFORGEN enhancement is very important -Not all AR Soldiers can be reimbursed for travel to BA

46. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 2. Formulate Assumptions and Constraints -Calculate costs for 1 year and 10 years -Use 2% inflation rate

47. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 3. Define Alternative Courses of Action 1.No travel reimbursement to Battle Assembly (Status Quo) 2.Reimburse all Soldiers travelling to Battle Assembly greater than 150 miles 3.Reimburse only critically needed Soldiers and Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles 4.Reimburse only Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles 1.No travel reimbursement to Battle Assembly (Status Quo) 2.Reimburse all Soldiers travelling to Battle Assembly greater than 150 miles 3.Reimburse only critically needed Soldiers and Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles 4.Reimburse only Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles

48. Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 4.Develop Cost Estimate for each Course of Action (COA)

49. COST Travel Reimbursement Cost COA #1 No travel reimbursement (Status Quo) COA #2 Reimburse all Soldiers travelling >150 miles COA #3 Reimburse Critical Soldiers and BRAC travelling >150 miles COA #4 Reimburse only BRAC Soldiers travelling >150 miles QUANTIFIABLE 1 year 10 years $0 $75M $821M $43M $476M $8M $82M NON QUANTIFIABLE Public Image Operational Readiness Morale 4. Develop Cost Estimates For Alternatives Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

50. Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Step 5. Identify Quantifiable and Non-quantifiable Benefits The primary benefit is reduced attrition Soldiers lost through attrition must be replaced, increasing training costs COA #12AR soldiers = 205,000205,000soldiers Reimburse allTraining cost 75,000 per soldier annually75,000dollars Reduced Attrition rate = 0.5%250soldiers Annual training Savings-18,750,000training dollars # AR Soldiers travel > 150mi = 50,00050,000soldiers Avg Travel Reimbursement Cost = $1,5001,500dollars total annual travel reimburse cost75,000,000travel dollars Inflation 2% per year COA #3AR soldiers = 205,000205,000soldiers Reimburse onlyTraining cost 75,000 per soldier annually75,000dollars Critically skilledReduced Attrition rate = 0.5%145soldiers And BRACAnnual training Savings-10,875,000training dollars # AR Skilled Soldiers travel > 150mi = 24,00024,000soldiers # BRAC Soldiers travel > 150mi = 50005,000soldiers Avg Travel Reimbursement Cost = $1,5001,500dollars total annual travel reimburse cost43,500,000travel dollars Inflation 2% per year COA #4AR soldiers = 205,000205,000soldiers ReimburseTraining cost 75,000 per soldier annually75,000dollars BRAC onlyReduced Attrition rate = 0.5%25soldiers Annual training Savings-1,875,000training dollars # BRAC Soldiers travel > 150mi = 50005,000soldiers Avg Travel Reimbursement Cost = $1,5001,500soldiers total annual travel reimburse cost7,500,000dollars Inflation 2% per year

51. BENEFIT Training Cost Savings COA #1 Status quo: No Reimbursement for travelling >150 miles COA #2 Reimburse all Soldiers travelling >150 miles COA #3 Reimburse critical and BRAC Soldiers travelling >150 miles COA #4 Reimburse only BRAC Soldiers travelling >150 miles QUANTIFIABLE 1 year 10 years None$19M $205M $11M $119M $2M $21M NON QUANTIFIABLE None Increased Operational Readiness Enhance ARFORGEN Increased Soldier morale Increased Operational Readiness Enhance ARFORGEN Increased Soldier morale Increased Operational Readiness Enhance ARFORGEN Increased Soldier morale 5. Identify Quantifiable and Non-quantifiable Benefits Army Cost Benefit Analysis Battle Assembly Travel Reimbursement

52. Case Study Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 6. Define Alternative Selection Criteria -Cost of travel reimbursement 1 year -Cost of Travel reimbursement 10 years -Training Cost Savings 1 year -Training Cost Savings 10 years -Soldier morale, value perception, and personal finance stability -Improved Operational Readiness and enhancement to ARFORGEN

53. Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 7. Compare Alternatives

54. Army Cost Benefit Analysis Battle Assembly Travel Reimbursement 8. Report Results and Recommendations Executive Summary The Army Reserve is considering reimbursing AR soldiers that must travel greater than 150 miles to Battle Assembly. Four Courses of Action (COAs) were developed to determine if travel reimbursement to BA is feasible All COAs require additional resources as travel costs are only partially offset by training cost savings. Recommendation: Implement COA #2: Reimburse all AR Soldiers traveling greater than 150 miles to Battle Assembly Cost to implement COA 2: Travel Cost s: FY12 $75M FY12-21 $821.2M Training Cost Savings: FY 12 $18.8MFY12-21 $205.3M Net ARC Costs: FY12 $ 56.2MFY12-21$615.9M Executive Summary The Army Reserve is considering reimbursing AR soldiers that must travel greater than 150 miles to Battle Assembly. Four Courses of Action (COAs) were developed to determine if travel reimbursement to BA is feasible All COAs require additional resources as travel costs are only partially offset by training cost savings. Recommendation: Implement COA #2: Reimburse all AR Soldiers traveling greater than 150 miles to Battle Assembly Cost to implement COA 2: Travel Cost s: FY12 $75M FY12-21 $821.2M Training Cost Savings: FY 12 $18.8MFY12-21 $205.3M Net ARC Costs: FY12 $ 56.2MFY12-21$615.9M