Attachment 0003 - Definition of Cost Analysis.pdf

APPENDIX A

Definition of Cost Analysis Products and Services

Below is a description of the 18 cost analysis products or services to be provided under this task order as described in paragraph 3.1 of the PWS.

1. Program Office Estimate

2. Life Cycle Cost Estimate

3. Cost Estimate

4. Cost Analysis

5. Software Cost Estimate

6. Analysis of Alternatives

7. Will-Cost versus Should-Cost Analysis

8. Cost Informed Trade Assessment

9. Development of Methodologies, Models, Databases, Tools or Applications

10. Economic Analysis

11. Cost Benefit Analysis

12. Business Case Analysis

13. Risk, Uncertainty or Sensitivity Analysis

14. Cost and Software Data Report Plans

15. Earned Value Management Analysis

16. Milestone Support

17. Weapon System Review

18. Acquisition Program Baseline

1. Program Office Estimate:

A complete, detailed, and fully documented material system life cycle cost estimate updated throughout the acquisition cycle and the Planning, Budgeting and Execution System. It estimates the system’s life cycle cost, from cradle to grave. This includes all Research and Development, Procurement, Military Construction, Military Personnel, Operations and Maintenance and Army Working Capital Funded elements. Reference: DA Cost Analysis Manual, May 2002. Cost elements included in the life cycle cost estimate are defined in reference and Appendix B.

2. Life Cycle Cost Estimate:

A document that includes costs incurred during the total life (from project initiation through termination) of a system or aggregation of systems. This includes all Research and Development, Procurement, Military Construction, Military Personnel, Operations and Maintenance and Army Working Capital Funded elements. Reference: DA Cost Analysis Manual, May 2002. Cost elements included in the life cycle cost estimate are defined in reference and Appendix B.

3. Cost Estimate:

A prediction of costs consisting of 1) a Clearly defined requirement, 2) a statement of cost assumptions, 3) a source identification for basic cost data, 4) A documentation of the methodologies used. The estimated cost of a component or aggregation of components that is developed by using historical cost data and/or mathematical models. Reference: DA Cost Analysis Manual, May 2002.

4. Cost Analysis:

The act of developing, analyzing, and documenting cost estimates through various analytical approaches and techniques. It is the process of analyzing and estimating incremental and total resources required to support past, present and future systems. In its application to future resource requirements, it becomes an integral step in selection of alternatives by the decision maker. Reference: DA Cost Analysis Manual, May 2002.

5. Software Cost Estimate:

A cost estimate / life cycle cost estimate for software for a system. Reference: U.S. Army Handbook Section 11, Software Cost Estimating, September 2009, ODASA-CE

6. Analysis of Alternatives (AoA):

An AoA provides a systematic and unbiased comparative analysis of operational effectiveness, costs, affordability and risks of potential alternatives. It also provides a comparative analysis of the benefits and costs of proposed solutions(s). Costs are typically life cycle estimates of each approach. Reference: U.S. Army Handbook Section 5, Analysis of Alternatives (AoA), February 2010, ODASA-CE; DoD AT&L Memorandum, dated December 4, 2009, Subject: Directive-Type Memorandum (DTM) 09-027 – Implementation of the Weapon System Reform Act of 2009.

7. Will-Cost versus Should-Cost Analysis:

An internal management tool for ACAT I, II and III programs where Will-Cost and Should-Cost estimates for a program are developed. References: 1) DA OASA(ALT) Memorandum for Program Executive Officers, Subject: Army Implementation of Under Secretary of Defense (Acquisition, Technology and Logistics) Affordability Initiatives; 2) USD(AT&L) Memorandum, 22 April 2011, Subject: Implementation of Will-Cost and Should-Cost Management; 3) DA OASA(AL&T) Briefing, 9 March 2011, Subject: Army “Affordability and Should Cost” Update

8. Cost Informed Trade Assessments (CITA):

A TRADOC assessment process to determine the most affordable and feasible system requirements to meet specific Army mission roles. Based on the specific mission role requirements: the CITA will identify solution system cost targets, identify potential requirement trades to sub-threshold requirements, and analyze the impacts of sub-threshold requirements on system performance and costs. The CITA will be used to inform the requirements development process and ensure that program capability documents reflect affordable and feasible system requirements. References: Emerging and will be provided at time of assignment of sub-task

9. Development of Methodologies, Models, Databases, Tools or Applications:

The design and development of cost estimating approaches, spreadsheets, models, tools, techniques, methods which are used to support the cost analysis, cost estimating process.

References: 1) DA Cost Analysis Manual, May 2002. 2) U.S. Army Handbook Section 2, Cost Analysis Process Methods and Techniques, (AoA), February 2010, ODASA-CE

10. Economic Analysis:

A systematic approach to identify, analyze and compare costs or benefits of alternative courses of action that will achieve a given set of objectives. This approach is taken to determine the most efficient and effective manner to employ resources. References 1) AR 11-18, Cost and Economic Analysis Program, 31 January 1995; 2) Department of the Army Economic Analysis Manual, February 2001

11. Cost Benefit Analysis:

A structured methodology of forecasting and comparing the anticipated costs and benefits of alternative courses of action in order to identify the most effective manner of achieving a stated goal or objective. Reference: U.S. Army Cost Benefit Analysis Guide, 2nd Edition, 14 March 2011

12. Business Case Analysis:

A decision-making tool or framework to systematically identify, analyze, and compare benefits & costs of alternative courses of action. Reference: DOD Product Support Business Case Analysis Guidebook April 2011

13. Risk, Uncertainty or Sensitivity Analysis:

Cost uncertainty analysis is the process of identifying and quantifying the uncertainties associated with elements of the cost estimate in the areas such as cost, technical and schedule. Risk is the probability of the unfavorable outcome. Sensitivity analysis is an analysis whereby different values of certain key variables are tested to see how sensitive investment results are to possible change in assumptions. It is a method of evaluating the riskiness of an investment. References: 1) DA Cost Analysis Manual, May 2002; 2) U.S. Army Handbook Section 12, Cost Risk and Uncertainty Analysis, February 2010, ODASA-CE

14. Cost and Software Data Report Plans:

The CSDR Plan specifies the WBS elements, the specific collection of CCDR and SRDR data by program or contract, reporting frequency, and other supporting material such as the RDT, the PAM, and technical characteristics.

Reference: DOD 5000.04, Cost and Software Data Reporting (CSDR) Manual

15. Earned Value Management Analysis:

Analysis of variance in contract costs and schedules. Extends to assistance with Integrated Baseline Reviews (IBR), development of WBS/CCDR Plan, analysis of CPR/CSSR monthly reports and providing EV training.

16. Milestone Support:

A variety support for milestone reviews to include preparation of cost related milestone documentation to interfacing with HQ AMC, DA and OSD level cost offices in reviews and meetings. References: To be provided at time of sub-task assignment.

17. Annual Program Resourcing Validation (APRV):

Process of updating a program’s Program Office Estimate to support the APRV process and/or provide support to the APRV process. The APRV is the forum to present program life cycle weapon system requirements and funding requests to a cross- Program Evaluation Groups (PEG) forum. The APRV is the primary opportunity for Product Managers (PM) and the Life Cycle Management Commands (LCMC) to present their current and emerging requirements to the PEGs. APRVs will be conducted for programs/systems approved by the Equipping, Sustaining, and Training PEG Co-Chairs who comprise the APRV Steering Committee. References: To be provided at time of sub-task assignment.

18. Acquisition Program Baseline (APB) Contract between the Program Manager (PM) and the Milestone Decision Authority (MDA) documenting program performance, schedule, and cost goals (objectives) Provides reference point for measuring program status Reference: DOD Instruction 5000.2 and the Defense Acquisition Guidebook, dated November 2004,