o&s cost estimating jhp case study 1 unclassified notional data for notional program
TRANSCRIPT
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O&S Cost EstimatingJHP Case Study
UNCLASSIFIEDnotional data for notional program
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Purpose
• Using the JHP Use Case, portray the PSM’s role in the O&S Cost estimate.
UNCLASSIFIEDnotional data for notional program
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O&S
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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
OwnershipCost
Acquisition Cost
Figure not to scale
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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
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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
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JHP MS A O&S Estimate
UNCLASSIFIEDnotional 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.
CAPE First Level
CAPE Sub-levels Driver HH-66 JHP
1.1 Operations Personnel # people 1,600 1,6001.2 Maintenance Personnel # people 3,000 2,5001.3 Other Direct Support Personnel
# people1,250 1,000
2.1.1 Energy (Fuel, POL, Electricity)
flying hours, burn rate,
$/gal
96,000140
$3.25
96,000130
$4.002.1.2 Training Munitions & Expendable Stores
flying hours96,000 96,000
2.1.3 Other Operational Material flying hours 96,000 96,0002.2 Support Services flying hours 96,000 96,0002.3 TDY # people 5,850 5,1003.1.2 Repair Parts flying hours 96,000 96,0003.1.3 Depot Level Reparables flying hours 96,000 96,0003.1.4 Contract Maintenance Services
PAA400 400
3.3 Depot Maintenance - Overhaul/Rework
TIA460 460
4.0 Sustaining Support
4.0 Sustaining Support fixed
5.1 Hardware Modifications TIA 460 4605.2 Software Maintenance & Modifications
fixed
6.1 Installation Support # people 5,850 5,1006.2 Personnel Support # people 5,850 5,1006.3 General Training & Education # people 5,850 5,100
1.0 Unit Personnel
2.0 Unit Operations
3.0 Maintenance
5.0 Continuing System
Improvements
6.0 Indirect Support
1.0 Unit-level Manpower
1.0 Unit-level Manpower
2.0 Unit-level Operations 2.0 Unit-level
Operations
3.0 Maintenance
3.0 Maintenance
4.0 Sustaining Support
5.0 Continuing System Improvements
6.0 Indirects
6.0 Indirects
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
HH-66 JHP MS A
aver
age
BY13
$M p
er a
ircra
ft
O&S Affordability Goal
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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
UNCLASSIFIEDnotional data for notional program
PSM’s have a vital role in the creation of each O&S cost estimate: providing data and plans and validating necessary assumptions.
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Estimate changes from MS A to MS B
$3.0
$3.2
$3.4
$3.6
$3.8
$4.0
$4.2
1 2 3 4 5 6 7 8 9 10 11 12
FY13
$M
average annual O&S/aircraft JHP O&S Affordability Goal HH-66 Average Annual O&S per system
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change number (X-axis) change description
1 MS A value2 average cost per person raised to $61,0003 fuel cost increased to $4.50/gallon4 indirects estimated to be 5% lower
5OEM labor rates/labor mix updated (45000 -> 60000)
6repair parts and DRL cost increase by 10% due to DLA purchase prices
7TDY costs reduced to $1500 for travel effi ciencies
8software refresh cycle updated (3000 -> 5000000)
9updated manning estimate require 10% more maintainers and 5% less support
10 training cost increase by 15%
11hardware refresh cycle updated (90000 -> 75000)
12price escalation of 1% above inflation added to repair parts and DLRs
The MS B O&S cost estimate exceeds the O&S Affordability Goal established at MS A.
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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.
UNCLASSIFIEDnotional 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.
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MS B O&S Estimate
UNCLASSIFIEDnotional data for notional program
1.0 Unit level Manpower
2.0 Unit-level Operations
3.0 Maintenance
4.0 Sustaining Support
5.0 Continuing System Improvements
6.0 Indirects
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
Average Annual O&S per aircraft
BY13
$M p
er a
ircra
ft pe
r yea
r
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.
3.1.
3 D
LR
3.3
D M
aint
-O
H/R
ewor
k
3.1.
2 Re
pair
Part
s
1.2
Mai
nt P
ers
1.1
Ops
Per
s
2.1.
3 O
ther
Ops
Mat
s
2.2
Supt
Ser
v
1.3
Oth
er S
pt P
ers
2.1.
1 En
ergy
5.1
HW
Mod
s
2.1.
2 Tr
ain
Mun
ition
s/Ex
p St
ores
3.1.
4 Co
ntra
ct M
aint
Ser
v
6.1
Inst
all S
pt
4.0
Sust
aini
ng S
pt
2.3
TDY
6.3
Gen
Tra
in &
Edu
6.2
Pers
Sup
t
5.2
SW M
aint
& M
ods
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$0
$60
$120
$180
$240
$300
$360
$420
$480
$540
$600
Cum
ulati
ve %
of t
otal
BY20
13$M
Milestone B Average Annual O&S Cost Estimate
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Tracking O&S Costs through the DAB charts
UNCLASSIFIEDnotional data for notional program
“Sand” Chart
“Spruill” Chart “Quad” Chart
Portfolio Data
O&S Data
O&S Data
Total Required O&S1,3 (BYXX$M): Established Affordability Goal/Cap:
Total Required Disposal (BYXX$M): Current Estimate against the Metric:
($ in Millions / Then Year) Prior FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY16-20 To Comp Prog TotalO&S RDT&E
Prior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)
Required1 $ -
Delta $ (Current - Required) - - - - - - - - - - -
O&S PROCUREMENTPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)
Required1 $ -
Delta $ (Current-Required) - - - - - - - - - - -
Unit-funded O&MPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)
Required1 $ -
Delta $ (Current-Required) - - - - - - - - - - -
PMO-funded O&MPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)
Required1 $ Delta $ (Current-Required) - - - - - - - - - - -
MILPERSPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)
Required1 $ -
Delta $ (Current-Required) - - - - - - - - - - -
TOTAL O&S (without Indirects)Prior $ (PB15) - - - - - - - - - - - Current $ (PB16) - - - - - - - - - - - Delta $ (Current - Prior) - - - - - - - - - - -
Required1 $ - - - - - - - - - - - Delta $ (Current - Required) - - - - - - - - - - -
DISPOSAL (specify appn)Required1 $
CUMULATIVE QUANTITIES2
Sustainment Qty (PB16)
Note 2: Quantity based on number of systems in service as of the end of the FY. Provide explanation if total sustainment quantity is less than the acqusition total.Note 3: Indirect costs are omitted from the individual lines in the table, but included in the Total Required O&S figure at the top of table . Total Indirects cost requirement is $XX (BYXX$), $XX (TY$).
Note 1: Requirement Source:
Total Operating & Support Funding by Appropriation
DRAFT
“O&S Spruill” Chart (DRAFT)
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Questions?
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BACKUP
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JHP MS A O&S Estimate Pareto
3.1.
3 D
LR
3.3
D M
aint
-O
H/R
ewor
k
1.2
Mai
nt P
ers
3.1.
2 Re
pair
Part
s
1.1
Ops
Per
s
2.1.
3 O
ther
Ops
Mat
2.2
Supt
Ser
vice
s
1.3
Oth
er S
upt P
ers
2.1.
1 En
ergy
5.1
HW
Mod
s
2.1.
2 Tr
ain
Mun
ition
s/Ex
p St
ors
3.1.
4 Co
ntra
ct M
aint
Ser
v
6.1
Inst
all S
uppo
rt
2.3
TDY
4.0
Sust
Sup
port
6.3
Gen
Tra
in &
Edu
6.2
Pers
Sup
t
5.2
SW M
aint
& M
ods
0%
13%
25%
38%
50%
63%
75%
88%
100%
$0
$50
$100
$150
$200
$250
$300
$350
$400
Cum
ulati
ve %
of t
otal
BY20
13$M
Milestone A Average Annual O&S Cost Estimate
UNCLASSIFIEDnotional data for notional program
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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– www.dau.mil (see upper rt corner ‘operating status’– 1.800.845.7606 Option 1
UNCLASSIFIED notional data for notional program