NSAM3 RFP Sec J Attachment 22 Return on Investment Calculation Guidance REV E OCT21.docx

Navy ManTech Program

REV E OCT21

Return on Investment Calculation Guidance October 2021

Attachments:

1. ROI Calculation for Sample Project

A. PURPOSE

This instruction provides direction on developing a Return on Investment (ROI) for Navy ManTech proposals and new projects. The intent of an ROI is to establish a measure of potential benefit of the proposal / project early in the planning and execution period. The ROI calculation is not intended to represent a hard and fast estimate but to provide some rough order of benefit that might be achieved if the proposal or project is approved, successful, and fully implemented.

B. INSTRUCTIONS

The following outlines the process and assumptions to be used to establish the ROI.

1. For ROI calculation purposes, the proposal / project will assume to be implemented three years after the project start date.

2. A five-year period, which begins three years after the start of the project, will be used to establish the ROI metric. For projects that realize implementation earlier than three years after the project start date and could affect the ROI, use the implementation date for the start of the five-year ROI period.

3. The current Navy 30-year shipbuilding plan will be used to determine the number of hulls impacted by the proposal / project. The F-35 production schedule, provided by the Joint Program Office, will be used for aircraft production quantities for the five-year period selected.

4. The “RETURN” will be the total savings resulting from the Navy ManTech project’s solution applied to the appropriate number of hulls / aircrafts identified in the five-year period selected.

5. For proposals that impact more than one hull or aircraft platform, the RETURN should include the total savings resulting from the application of the project’s solution to all hulls and/or aircrafts impacted. For example, a project that will provide project savings to both VIRGINIA and COLUMBIA Class submarines will use the savings estimated for both platforms as the “RETURN” for the project. Cross-platform implementations are encouraged and need not only apply to hulls / aircraft within the Navy ManTech Investment Strategy (i.e., ships such as LHA, LPD, and NSC or aircraft such as F-18 and UUVs, etc. can be included).

6. For platforms that have multiple hulls being built annually, determine whether the project solution applies to all hulls. For example, if a project solution applies to a process at Groton and applies to hulls built and completed at General Dynamics Electric Boat, then only one hull per year should be included in the RETURN.

7. If other assumptions make more sense for a specific project, state the assumptions and explain why they are being used.

8. Use the generalized formula shown below for the ROI calculation:

ROI = RETURN - INVESTMENT

INVESTMENT

Use the following guidance to determine the INVESTMENT.

1. Include the Navy ManTech investment.

2. Include Program Office funding for process certification, training, and capital equipment investment.

3. Do not include shipyard or original equipment manufacturer (OEM) investments for equipment and facilities that apply to other production applications.

4. For project solutions at multiple shipyards / OEMs, include the investment at each shipyard / OEM to arrive at the total INVESTMENT.

C. QUALITATIVE ROI GUIDANCE FOR AFFORDABILITY PROJECTS

The following qualitative guidance outlines how the ROI will factor into the attractiveness of the proposal / project:

1. ROI values less than 0 are considered undesirable as an affordability project (cost reduction less than twice the investment over a five-year period).

2. Target ROI values approximately equal to 1 are considered minimally acceptable for an affordability project (cost reduction is twice the total investment in the project in the five-year period).

3. Target ROI values of 2 or greater are considered good affordability projects (cost reduction is at least 3 times greater than the total investment in the five-year period).

ATTACHMENT 1 – ROI CALCULATION FOR SAMPLE PROJECT

1. Project: Optimized Thick-Section Welding – a new welding process project conducted for Newport News Shipbuilding (NNS) will reduce welding time and improve quality for thick-section welding.

2. Period of Performance: December 2017 – November 2019

3. ManTech Investment: $650,000

4. Implementation Assumptions:

· First Year of Implementation – 2020

· Final Year of Implementation – 2024

· Will implement at NNS on CVN 78 Class

· Number of Carriers Built Between 2020 and 2024 – 1

· Will also implement at Ingalls Shipbuilding on DDG 51 Class

· Number of DDG 51s Built Between 2020 and 2024 – 10 but only 5 at Ingalls

· Will also implement on other ships under construction at Ingalls Shipbuilding – LPD/LX(R)

· Number of LPD / LX(R) Acquired Between 2020 and 2024 – 1

5. Investment Assumptions:

· ManTech Investment – $650,000

· CVN 78 Program Office Investment – Welding Process Certification – $50,000

· *NNS Investment – Facility to House Equipment and Equipment (will be used on VCS and CVN overhauls) – $150,000

· *Ingalls Investment – Welding Process Certification – $50,000

· Ingalls Investment – Welding Equipment (used in DDG 51 assembly cell) – $80,000

6. Return (Savings) Assumptions:

· Savings for CVN 81 – $750,000

· Savings per DDG 51 hull – $190,000

· Savings per LPD / LX(R) hull – $150,000

7. ROI Calculation

· ROI = RETURN – INVESTMENT

INVESTMENT

· ROI = ($750,000 + $950,000 + $150,000) - ($650,000 + $50,000 + $80,000)

($650,000 + $50,000 + $80,000)

· ROI = ($1,850,000 - $780,000)

$780,000

8. ROI

· 1.37

*Do not include in ROI calculation because funding is provided to improve a facility or a process that has a more global application within the facility.

N0001424R0002 NSAM COE III Attachment 22 2