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2a. SECURITY CASIFIATO AUTHORIT D ISTROUTION I AVAILAMILITY OF REpORT

2b. DEC ASIPICAT1ONIOOWNGRADiNG SCHEDULE Public Release; Unimited Distribution

4. PE RFORMING ORGANIZATiON REPORT NUMBEWNS) S. MONTORIN ORGANZATIN REPORT NVUMR(S)

Go. NAME OF PtRFORMING 00AZTO bOFFICE SYMBOL NM FMNTRN WM~*

Operations Research and of ap7. AM F OITRNGOGAIATO

Economic Analysis Office j DLA-LO Def ense LotiaticsAec DALGC. ADDRESS (O~y. Sta*t. ald WC*o) ft. AORSS 4011. Staf. and V C*)

Cameron StationAlexandria. VA 22304-6100 Caneron Station

____________________ ________ I Alexadria. VA 2230-6100Ua NAM OF FUNDING /SPONSORING ft. OUNCE SYM 10. "OMIJ T INITNMINT SENIMCATIO MAMAR

ORGANIZTION of ^%*baW

_______________________j -L~.ADDRESS MIy. NOWl. ansd ZIPCO*) A M OCameron Station PRO"" F~iT S UNIAlexandria. VA 22304-6100 M wO o o O

1~4 MIL Woowd aute~ (U) IC00riC Aalysis (M r rrM tnto otntSystem Control Board (AlICS) Vorkiug Group CataletG-T@.iae-0-Liae (CYCS) Autoonted

11 PIRSONAL AUTIOMJAMet Rider &"d licard Rsar

1. T"M OF ERTI b UWRB Sall OF pm3 P" 1 co

16 SUPPLIMNARY NOTATIN

MILD 601D V040"n Awaylyss Autoated taffemeel on lietift. Mwsemt"________ Cot Ama74ts. Sestivity A0417610. Bernetit "170s. LIU

'- Current DLA cataloging operationse use a wel ta 1 "ernst ter sem to p Of- Stanrequests and maintain ezieting catalehag tmesa. MU~ sommn Fmiye sessessthe econmic feasibility of replacing the eu we moe1 eporettuse with a , -m edInfotmstiom System (AIS). In the ecemei amelyfts eseparisem mijlos of esoteanbenfits are dome between the curr~m nothed of eperettm d the C1WL A=5 posposiSeasitivity analyses are perteoo oun, emStIV1sat eae of the All proposl In order tooddress uncertainty I& future Coot sot mates a to dmtoumias *e oafet aw serSw-!in these coots will hays em the payback perilod. Iendj as med softbsed on theresults of the economic analysis. - ,,A Avt

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3consic Awdys.e CM) Support ForAntememe .Inttion ystes Control Doerd (AlSM) Vorking Group

Part I

Catelosia-Tol-O-Lime CI) Antemsted Intonaton lystem CAIS)USeumic Anulyud..

Ame iSAeession For 4NTIS GRA&IDTIC TABUmmanounced 0just ificat ion

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cwurout 1XA cataloging qersties wse a semal WiMfestiost 61YOStto prepare ser iten reqsts O smaistaia existiag eataleouatrasations. 'Thisecemmic analysis asmsee the ecoussicfeasibility of replacing the curent mssal oerations with aCataloviag-bol-O-Usme (CTW. uteated Isf oatiem System, (AIM) asa part of the Itandsd Automated Sitetiel. Memen~t System (MENU)

.d ouiatie

Is the eomic analysis. empeuisee anlyses of cent.sd Wmef itswve dose betpes the ewroes sthed of opereties sed the CIRL Allproposal. Sensitivity aslys.. are pserored em sisif Leat costs ofthe AXE proposeal is ecduw to address uncertainsty in future estestats and to detegmise what of feet mW varieties in these conswill hoas the 11heCk parie& weendtesee mafe bosed enthe reslts f the SeOMUsi 8Mlysis

Mhe results of the ecesmie analysis die that the CIU. ll isece --Mmii aly feesible. This eeommianaelysis we perfeumed as thefit phase *sly of a three phase Plan to eshmse the overallIef ficiency of the Paderal Catalog Systs& Is &ddtis this eeemicanalysis will serve "asample for future ll eesui amssperformed by the latepated Priority List (IML NU OShi Grewp m-rI

8. W. COOKCaptain, SC. USHActi.- Deputy Assim Ch9W

PuOcW wd PlnS

Title LaL

List of ............................. viiList of Viue........................... ixR xecutive Snaxy .................................................. I xi

-I. Objecntive .............................................. ... I 1

IV. Aein .................... ........................... ... 1e 2

VI. Cost Analysis............................. 6A. Cost Comparison Anlysis................... 6D. Savimse/Im'estment Ratio (SIR) ......... ................... 6Ce Disconted Payback A5517is ............ eeeeeee 7

VII. Sensitivity ........ eec.............. 7

A* Cost Emnte.e.eeeeeeeeeeeeeeeeee. 7D. Useful Life ..ee.... ~ eeeeeeeee.~eee.e 9

VIII. eeft.............. ........ ..... 9A. Quantifiable Benefits.... ee... ............. 9D. Nosqumtifiable Benefit........... ........ 000000*00000 14

Ix. Denefit Aslysi ............................................. 1 14

Appendix D. Life-Cycle COL Investment Costs and Sawings (Del)Format A-1)ee...........e.ec...e~ceeec..

Appendix C. References ........................ C-i

LIST 01 TA IUS

Number Table

I Cost Sumaly ............................................ 3

2 Life Cycle Costs (Alternative A)........................ 4

3 Life Cycle Costs (Alternativel)........................ 5

4 Savinug/Investment Ratio 6

5 DiAscounted ayback Calculations..................... •

6 Tim to Complete Procees in Rours....................... 13

7 Analysis of ienefits....,.............................. 15

A-1 ADP Equipmuit equireents/osts........................ A-2

A-2 In-Noune Service COAS.......e.......................... ,-$

A-3 Personmnel .equired/Sa . *. ......... *... ........ *...*... A-4

A-4 Personnel Costs"rer (Alternative A).................... A-$

A-5 Personnel Costs/Teat (Alternative 3).................... A-5

A-6 Personnel SawinsIYear.................................. A-5

A-7 Proration of Permemmel abats ost .ai ..gs... ....... A

]1-1 rcouomic Amalysis - D0 ineeto (weot AP)......., 3-1

vii

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LIST OIF lVORBM

Numbe.r Title

1 Altenstive 3 Persosel. Csts ................ ,......... 10

2 Altermati,. I Cumulative nvesmemst Costs: With AmalCost Svwas 31d C stat......................... 11

- Useful Life Amalysis for Alternative 3 ADF Iquipmt.... 12

ix

EXEnmI SwUMMO

A maj or goal of the Standard Automated Materiel Management System(SAMMS) is to improve the federal Catalog System's overal Ief ficiency.Part of this goal to to improve SAMMI support to the four hardware Defenssupply Centers (DSCB) and the Defense Persounsl support Center (DISC).Thus. a Catalog"ng Tools Os-Line (CTr.) Automated Information System (AIS)is under consideration. This state-of-the-art system is designed toinclude ainicomputers with optical storage and workstations consisting ofvideo display terminals. keyboard. and magnetic disk storage.

This study provides a cost/benefit analysis of such a system. Twoalternatives are considered: the current manual system in supply Centercataloging operations, and the CIOI AMI The analysis time horizon is 15years C1YS6-OO). Costs are stated in 7M6 dollars.

Total discounted life-cycle costs for the current operation are$118.410.000& this includes costs for Four-fhase equipment replacement,personnel, equipment maintenance, and supplies. Discounted lif e-cyclecosts for the CTOI. All are *110,519.,000t this includes costs for ADPR.equipment replacemet, site preparatie software development. coetractorsupport. training, and residual value of replaced equipment. The CVCL llhas a life-cycle s ateng/iLeveestment ratio of 1.641 Its operating costseving. will1* low ful. 1 recovely of it. Initial invetment costs within 9.0years. or 5.0 yeaws after full o peeaio bagins The ffM All willI requirean estimated 139 foller personel to support Supply Center cataloging eperem-tieus.

A sensitivity anlysis revealsa that CI5. is esmislal ly preferable tothe current eavirorneat go long Sl

1. Initial CRL AXE investment eonts are loos than "26.000.(no. study best estiate, to *isNmAOJ

2. Useful life of AM1 in at least six year.. (The study beetestiate is eight years.)

3. ff01 personnel requirsmeats do net emceed the study's boatestimate (373 personnel. costing $10,692.000 annually) by aeo than 139,i.e., a additional 55 personnel equivalents esating as ntva *1"77.000anually.

Deyee its quantified 1 if 0-eycle estaft enat CM weuld offer thefollouing advantages ever the current operations

1. Improved proeesif tims.

2. Reduced administrative leadtime (ALT).

3. Interf ace capabilities

4. Improved work quality end aentrol.

zi

I. OBJECTIVE. The objective is to analyze the economic feasibility of aCataloging Toole On-Line (CTOL) Automated Information System (AXE) as amintegral part of the modernization of the Standard Automated Materiel Name-sent System (SWIS). NMjor aims of the CTOL application are to improveprocessing time. work quality. and work control.

II. LAUGROMID. Currently. in cataloging operations at the four DefemeHardware Supply Centers and the Defense Personnel Support Center (DISC). thedevelopment of item identifications for new National Stock Number (UK)requests and maintenance to existing item supply are primarily mmmual opeor-tions. These manual operations require significant personnel resources andlong administrative leadtimes. Thus, the Cataloging Tools On-Line AutomatedInformation System is being proposed to replace the current msmual system.The various wcataloging tools" (or reference data) sed in catalogis eper.o-tions include engineering drawings. Federal Item Identification Guide,Government Industrial Specification Standards, commercial catalegs. cataloeoghandboks and the Defense Integrated Date System (DIDS) Procedures Memal (DuO4100.39-H. Vol. 10), which includes multiple applicatiom refereaces,imstructioms, tables, and 8rids. Ipompntation of the CM LIS will metchage the work to be dome. but it will completely chamge the smtbods used toaccomplish this work. The economic Coesideratiose of two altermativee, thecurrent ssual system and the proposed mtemeted system, will be addressed.

III. ALTUU TIYUS

Alternative A is the current mammal system utilised is cataloging opertos.Current operstions require a large volume o paps ipoth passing %breugmultiple steps of several manual processes. Thee preceees imelve mamalcompletion, review, and control of tremasctiese. Preductie sad .senitreports are also produced mammally. The 7our-lame squipment prevides theonly autemtie under this system and is used for date estwy aloes. As amesl operation, the current procedures merk satisfactorily, bet the eurremsystem may set be adequate to ar the volumes of dots meeded if futurowrklod increases approciably's. Uder this system, the %gatelegim testaare recorded om microficb, bardeopy. amd 35 millimeter film.

Alternative 2 i the proposed CTM Automated Informatios Se tem few s etegioperations. The C L AlS will use tate-ef-the-ert teebeW ialudMdaminicomputers yf4., optical sterap and wikstatims (video deplaya tmalaj kybem as) . It Will be Cpal* of suppertift estasift ep etsne

at Deme Cestrvctiss Suply Center CUWC). Ws eaUetrome e lyCemner (90)00 Dfase Gemn eral Supply COter (UM), Defeme IsdusWed $onlyCoster (DISC). sad DPWC. The herdwore eemfiprsatss is imed to bmas athreo-feld weableed increase ever the . AII operating life. be o4L vUlistertme vtb mirems databases ineluding 3sfoes IstegreWt " ftes Ss'eTotal Item Doeerd (DID3 TIR)* Toecmeal 1sf emste brae and GNMR4 000i -c"ties (TISCA). a" the ?rvisieni Cestrel file. TIM es-lse e toOestaloig toel*0 datelmws will be aesopltmbed throw* dho ds esThe catolog techniciam at eek ethetatioen will be able to sesMs. esa t,revieaw. and copy designated databae@ directly. The ausmpted drem w11stere, press, and tremmit dota. Dots to be stesed is w teamo inwill seoist of both graphic mod test dets. It will be input b hqeuiei Ioessmin, and nmpetie disk/tape. Dota to be presossed will eemset alataleging trmeactiems developed en-lin at dhe wewbeatiems. se so be

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Alternetive B represent annual costs beginning in Project Year 5 (FT90) whenthe CTU. AI$ would be in full operation. During 1oadtime years 1-2. annualcosts are the sms for both alternatives. In loadtine years 3-4 of Alterna-tive S. the sanual costs are adjusted to account for the partial operation ofthe AIS as the ADP equipment is installed and application software isdeveloped. The amuel costs during the leadtime years are reflected in thecumulative recurring costs.

Table 1

COST - (*000

Altermtive A Alternative B

Coesatat Discoust Coastant DiscountedMourecurrift Cests [ ] Dollars Dollars Dollars Dollars

ADIP Iquipst $ 0 $ 0 $10.100 $ 7.377Site Preparatioe 0 0 700 516$ysteu Develeomst 0 0 2.620 2.174

0ofemre Dwelop/Training

Contracter support 0 0 200 1913.placat 700 405 10.100 3.070Trmel 200 M

Useemrias costs Y 5 .MLass remidual vlius (131) (33) (6.313) (1.545)

Total moureurrig csts U 72 IIMUM

PeOW60601110.11 143 $14676 810 1 M

(Appeadda A)sere 0 20

U mlz8 mo

o5 2

Semmin[ .) 8M a$ 611

Total Diete d be0ts 115. 11953

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VI. CWT #MLTSII

A. Cas Ciertsem Amaisia. Whether to continue with the mnanuallyOPettd &etam or to covrt to On autGMated data eyesm is analysed by firstceupawing the total discounted costs for each altersative, ever the 15-yoarpriaJoct life. These life cycle costs are preseted in Table 2 for AlternativeA and Table 3 for Alternative B.

B. itsi!WnVeetset Ratio (XIR) 13. To measure the ecomnmicameaoe of the Alternative 2 investment, the ratio of the discounted life-cycle so1m cost meins to the total discounted AIS imewtnemt costs may hecalculated. This sovinesiuvestnat ratio (SIR) compaes the coat swvings tothe inveaetot ceses aftesary to etffect these coot sav ings. The cost savingsof Alternative 3 include the differeace, in recurring costs of the two alter-nastives pl4w aa planed am-tiw Alternative A costs which a" he avoided byimplemeting Alternative B. If the SIR is equal to one, then the presentvalue of the ciimlative iavetuet coats equals the present value of thecommative coat meie needed to recoup the investmest in the propoed AID.Tbma for as invet t to he economical ly esed, the SIR me t he greater thanor equal to one. A SIR loe than me indiates that the Alternative 3imeomet wilI nevr he recouped, in which case, it would not he aneonommically wowthohile investment. Table 4 above the calculations for theAlternative 3 MI.

Table 4

V.. SVING I~in~in ATIO

* "Oj ct investmet Cost

1540 02 10-70 03 310 lit4 9030 lUG

5-15 3055it 350 (Cont Aoidene)13 1010015 (6313) (131) (Alternetive A

binmnal value)

179(.7ft) 1MSS(.717) *3455(7.90-3.336) 33GS(.340 - 131(.231)

340(.934) *1078(.67) *3180(.70) * Ml(.717) + ISIS0(.36) - 6313(.251)

Since the SIR is greater than 1.00. th* isvestuost is economically ogmid. IsAppendix D. a DoD! 7041.3 lotust A-1 is provided as an alternative inthod adcalcuating the SIR.

C. ic to qtaAmal at.. The discounmted payback periodrepresets the time it takes for Al terstiv&.2Is cumulative ftcounted estss,*sag te receup the cumulative discouted investmnt costs* Theinvetment emote represent the am of the ini tial sad replacoeet auuan~costs lose the terminal value of inivessent at the *ad of th~e project life.Per Altorsative S. the discounted payback calculations are preseted in Tale5. In %he Cumulative present Value celum of Table 5,* it can be soethatin P"Oct Toor 9, the cumulative cat swings exceed the canlativediscounted investment costs to this p.1t. The discounted investmn cootoccurring after Tear 9.is $1,485,000 (83,070.000 - $1.585,000). If this isadded to the cumulative (discousted) Tear 9 investment. $10.424,000. the totais $11.M9.000. The cumulative dioceusted cost swings through Tear 9.$11.9,9000. are still sufficiost to amortize this total. Thus, the paybeekperiod for Altemnative a is 9.0 years.

VIZ. Tv M*M Sesitivity analyses should be performed an (1)the damenst eoeaof the AX proposa and (2) certain major wseutim Imadeis the A. Them We boy factors of the VA contain degrees of futureuncertesty sad should be tested to ee what affect major uncertainties haveon the disesmte payback. Pelloit are the descriptiess and results ef thesesoitivtty analyses.

A. GetU W Saesitivity analyes ore perfome M onwe of thecoet elommt inhis economic analysis. They are personnel coot. Mdinesment costs fee Altermative D. Thes erg perforumed to detemlue ho thedisouted payback poried will be affected if variatioes in doe best eatintesof the costs should oetu war the 15-year project life. Mile sme for aperticular eat element sare varied, all *thet costs are held fixued.luweetaet Mad persoelm cests woe selected for further anlysis adse" thoyar the dmat costs is the RA ead sa change@ in them emete des tounforeseen steiestmes could oipdieestly 1sf Los=*e the eeeniafeasibility ad th ll proposal. Graphical r"preatatiomse of dho osetsensitivty analyse a"e provided in liae 1-2. The following a"e thedesriptions of tdo coot sesitivity aalyses ad thir remults:

1. &M I .L MWEinLvag. Kom. the ats mth- --mystM is now. the NA of prsoel reqwrsd to pond.. vas oblaactione emtame a &WgOO 0f uncertainty. 1684 powsoemi eons f1rntme d mystom a"e varied within a +1CII ras" Using istromewt 44 a.3omv. . the fitrmt we yes, peoused comes ore held satemtosta obteraw"t the sa the current systas poreemmel emosts. Pbet is me GM US

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doesn't begin until Project Year 3. Then the discounted payback period isrecalculated for each increment. The results show that if fewer personnel arerequired to process workload actions under Alternative B. the payback periodis reduced. If more personnel are required, the payback period increases.The payback of 9.0 years determined in the economic analysis varies betweem6.8 years (-101) and 14.1 years (+1OZ) in the sensitivity analysis. Ifpersonnel costs had been increased by 122 there would be no payback within the15-year project life. Results are shown graphically in Figure 1.

2. Alternative B Investment Costs. Changes in the market price ofthe ADP equipment at time of purchase and changes in equipment requirementsare two of several reasons initial and replacement investment costs maycontain future uncertainty. This sensitivity test keeps all costs exceptinvestment costs fixed and varies investment costs between -252 and +6( inincrements of 5%. It is found that the discounted payback varies between 7.3years and 14.5 years. If investment costs are varied by 651, no paybackduring the life of the project exists. In the payback analysis, thediscounted investment costs are $11,909,000 and the discounted payback is 9.0years. The results are presented graphically in Figure 2.

B. Useful Life. The assumption wit made in this RA that the usefullife of the ADP equipment is eight years • Since the Cra ADP equipment isstate-of-the-art equipment, it is uncertain what the useful life will be.Thus. the variations in the useful life of the equipment are tested to seewhat the effect will be on the discounted payback period. Equipmentreplacement costs are incurred in each of the project years immediatelyfollowing the last year of the useful life of the equipment. That is,replacement costs are incurred more than once if the useful life expires morethan once in the project life. The replacement costs of $10.100,000 inProject Year 13 are considered as replacement costs for Project Years 7through 12. The analysis shows that if the useful life in less than or equalto five years. the discounted payback periods vary significantly from theestimated 9.0 payback. This is because replacement costs would be incurredmore than once due to shorter useful lives. If the useful life ia greaterthan or equal to six years. the discounted payback periods vary to a lesserdegree. Figure 3 shows the results of the sensitivity analysis for the usefullife assumption.

VIII. BENEFITS. A breakdown of quantifiable and nonquantifiable benefits ispresented below. The quantifiable benefits include improved processing tims.reduced administrative lead times. and future interface capabilities. Thenonquantifiable benefits include work quality and work control. The identifi-cation of benefits and measurement of quantified benefits are in accordancewith the DLA-OSS Functiyy? Development objective and have been approved bythe DLA-OSS management -.

A. Quantifiable Benefits

1. Improved Processing Time

With Alternative A, development and maintenance of catalog transactions aremanual processes. For Alternative B. automated steps in the item identifica-tion processes allow for faster processing time in preparing item identifica-tion data for a cataloging transaction. Faster processing times will allow

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cataloging operations to beadle possible increases in future workload andreduce backlogs. Thus. impoved processing time will increase response timesfor military service cataloging needs. Table 6 provides times in hourn underboth alternatives to complete each item identification process.

Table 6

TIME TO COKILIT PROCISS in nowR

Item Identification*Process Alternative A1131 Alternative B Difference CBrs)

Request 4.2 2.5 1.7Trasfeor 1.6 1.2 .4Reision 1.4 1.1 .3Cancel 1.6 1.4 .2Add, Cnauge. Delete 1.0 .8 .2

9.6 2..6Y

For Alternative A. the tims were obtained from the N.A Vbaameat 3.iernStandards (DIES) Special Purpose Data Standards during Nwamer 1983. Tocalculate time maved uner AltemVtve I. tiasa for tbsse process stoe whichwill heoelmiated are ttalledi"J* The elimsinated steps were identifited byDLaL-ZS and functional sers thromaja actual observations draring NW, 1IM, ofthe itsm Identification processes in DOW cataloging operation*.

Through analysis of the time to cmplete processes and tho tim sawed -- derAlternative 5, the following benefits are derived:

a. Tim required for the itsm identification request promoewill be reduced fromt 4.2 hours to 2.5 houts or a 402 time reduction.

b. Tim required to enter and edit item ideatification datafor a cataloging transaction will be reduced from 5.6 bore to 4.5 hour or as20S reduction in tine.

ICe Overall, time, required to prepare itsm ideutation datafor a cataloging transaction will be reduced from 10.0 beors to 7.0 bee- or a

* 30 reduction in processing tim.

2. Reue dijrtv edTm(L) Alternative A requiresseessivie ALT to obtain nmU.owotplcisal 60 fte to otaia mM. This 60-day tiairome will be significantly reduse by mtanWe

processing enhancemets and enp-line mafapusat emetrel of theatigmtransactions. Is the Accelerated CetalogI $- /Ichmimed atry(A )Feasibility and Coat Soest it Aalysia it was estiated that the GO mmiidays currently jiutred to obtain a am = will be redused to 30 doM a 5tim reduction *f Sources. of ALT delor mar oereat qstm bmbf theroutine for haning errors. nanam woeed and moeent ofasd peh.

13

3. future Interface Capabilities. The ADF equipment forAlternative I will provide th. future capability to electronically interface,from CrOL workstations. with other military services, DSCs, private industryand Vwernmeg.s agenc ie equipment for the transfer and receipt of text andgraphic dataL]

B. Nonuentifiable Benef its

1. Improved Work Quality. Under current procodures. editing andvalidation are done separately from data identification and are often donelater. When errors are detected by SAM.U DID8. or quality control people,the papetwork must be found, error identified. responsibility for correctionasigned, and the paperwork sent there. Most of these errors are buan errorsdue in large part to manual processing. In the C!U. AIS work quality will beimproved by use of built-in edits to identify errors at time of occurrence inprocessing cataloging transactions. This will significantly reduce (possiblyeliminate) DLSC rejects. thereby eliminating the time relyfred by thecataloging technician to control and process the rejects .A The errors willbe identified while the cataloging technician still bae the work material inhand rather than, as under the current system, after the work material hasbeen filed away.

2. Improvied Work Control. Under current procedures, paperwork isused for each step of the cataloging function. To control the paperwork oneach item. it is put together as a packet. A significant amount of manpoweris required to transfer these packets free one organization to another. Also,data entry is separated from identification of the data to be entered. Datawe copied onto workabeets as they are identif ied and then thee. worhabeetsame sent to a separate group for entry. Separation of these 41aie prov idescontrol and ef ficiency, but it requires a significeast inmt of weal s-r toperts=m the data entry function. ?hen additional anpswer is needed forverification since everything is entered twice. The primary area consideredfor atomation muder CTL is work control in order to reduce the manualprocessing and control. ThUen, through use of a complete electronic audittrail, cataloging transactions can be controlled from the time they arereceived until they are accepted by MIUS/DIDS. Also, improved productioncontrol by ame of onr-line producti - efficiency, quality, backlog and controlfile aging reports can be real isedl~u.

11. NOMA N=?*1*e 7 mosrisg the incremntal importance of the quantifiable beeitswhich are red for both alternatives. ~U benefits thaselvee have baeoffnied faster waebgts by the functional persennel to establiab therrelative impertanee te me another. Mwe benefta are rashed on a scale of 0to 10 slusivee oheme 0 meanese me asronenta value' and 10 represt an'attainadle idal. M sore fee each qitiable boeleit is ebtamed byinltiplyise its rooift by the asiged fater Wei~bt.

Table 7

ANALYSIS OF INCRM40AL DNWITI

lemef it Factor letaMt Altermetive A Alterete 3

Improved 5 0 3ProcessingTie

Reduced ALT 4 05

ftu~r* Istertacing 5 0 t0Capabilities

rector Weosbt fletitics

5 tramly impertant

4 IiNPortset

3 Desirable

2 Vice-to-h.w

I Nmiml -"mThe iwerumomia benefit asalysie resits in a saero 44 0 far Alternative Abecause Alternative A to the statue qua sod thefo a6tbta imermmelbenefit. Alterinative S. bswer. schiseed an iscramotel benelit saws ed 8out of a peesibioescore of 140. lme. based em qeat.f ablo e oftt saly.the awsr far hitemmtivt 3 indicaeas a potential '---vum toe eatalelaoperations.

L~Tfl objective 44 this aalysis wa to emss the sesmi.fosft y pop -C Al I houmaet EM Ga qo io S. dsa.

for the uutmt esinaie. 1 it is the findims ad thie ft do ab 4M Aise eesmsmitelY and eetisally peeeI le It WMi aWLM as 691ODWcumletive Iiea eoe miqvi of s19.55.9W in IT U4.11. mse ~ theCeMat "406 Us WM6a 00f Aem e saved viii be In (nome mt A6Tddo A-3). %s Ab. w3 ill also W Saw itself withia 5.S peonse m ftUl

operatieesi. A SIR of I." iadisess the pospesed A28 is measUIseine iwestaet seer dth ul pueest ife ##4*. If vmisdditwlispreve preeuosei tism Es am. = bmses---A dud resme f

leadieis for efteims no s fe qes. ul-am Oda"tso Ifaerror in ameduoiss ttmeatieem ViUM 55o lemstly imp,.. e iei#oWork. Yas* the ase ;f m ofessala eat tsnmi. 0ada4 v660iwill be aset,.Ued fin dho """ *uv ._.sa mii gh *r "Up"

OWhe gowesue qpe eius to WING, sell d~sevieft doNOM ANMOMOkseem.

AP 11I A

A. Costs

1. Nourecurrima Costs

a. squipmewnt

The Few-ur-se equipment being sed uinder Altentive A coon so lbger bepurcseed from the marnufacturer. It is also =A policy not to purchase,obsoelete equipmet. 1bus, replacement equipment. which is necessary inaProject Test 2. would hboo to be =A I~sI cp~ r System (MSI) equipment.The estimated replacement conts are *SSG0. X0" with a useful life of eigbtyeas. for Aternstive B. the cataloging operations are fully ouemated. TMeC71L automated datesysems will be wooed by the fivte Catsos and support"d by

teboese L9ystics, Sevies Center (U=) sand the MA Systems AmtemtedCener DOW"J.TheCIU. date processingsequipees compoeate consist of

scanners. werbatatiems (video a"5t, trnals sad beyboards) * priaters sndM IMee mseststrg stgo . fqConts no ~fl are i ommetedollars and are met discounted. Ntimeted malt tests of the CM AMcesee a a" as tel tame:

(I) Wrktattomts, esstreller. sMd CM priced at *10.0W0.

(2) Printers estimated s low sod sor printers at 83.60sek.

(3) Losem disk storage devices to bhadle dots aterg require-eesestimated at P00.000 oacb.

(4) $se"r estimated at $70.000 each.

The tetal costs o the CM with Integrated pro~etm.k eptcel Oterg smewekttin are preoemtad is T1*. &-I. *The equipment will be y-dodunes Proj set losr 3 (Me6) sad "aojct leer 4 (MM6).

With as seoomed eigbt-year mseeul Hime. tho AW equipent will huve to beropiseed io Prejet lear 13 at a meet of *10.100.00.

b. Site Preperstiout*e More Alternative 2 d tthe d 1seaW.eof equint at the msaters will be dsesmiusd by seo boter's usmpoe.Speialty prepared sot*s will be trquied for w omputer equponeporeoe.. lbor SUM wSll be soe os eated with imotedle"Ms of limereqetre toe PsmetdtheM squipment o so semt r amp Mg witas dequso numb of PIMP to 51.1 weeottie. havrdmr. WAOM psia

soe We -2- '?.t $390,60 to "Soet lowr 3 M1W Sod bwk isproject Teet 4 C 914

A-1A

VA Ifar-Ill e

go 1 ad s

41I'Sgo

iiS'.do

c. System Development

(1) Contractor support. Contractor support cots a

Alternative B are estimated to be $200.000 in Project Year 1 (FY86) LO.10]These costs include assistance in system design/development and personneltraining costs for DSAC personnel.

(2) In-House services. Alternative B costs for servicesprovided by DSAC. DLSC, and the Centers include system design, systemanalysis, programming, equipment procurement, and training. The estimatedcosts are provided in Table A-2.

Table A-2

IN-HOUSE SERVICE COSTS[81

Project Year DSAC PSE/DSC

1 $ 210.000 $ 80.000

2 890.000 130,000

3 900.000 130.000

4 200.000 80.000

Totals $2,200,000 $420,000

(3) Travel. An estimated $50.000[8] per year for ProjectYears 1 through 4 will be required for travel between DLA Headquarters. DSAC.DILSC. DPSC. sad the four hardare centers. The first four years of theproject will require frequent trips for in-process reviews and FunctionalProject Development Group eetings.

d. Rasidual Value. In Project Year 15. both alternatives will haveresidual values for equipment replaced. For Alternative A. the remaininguseful life of the equipment replaced in Project Year 11 is three years.Tbus. the residual value of the equipment in Project Year 15 is 3/8 z $350.000z $131,250. For Alternative B. the remaining useful life of the equipmentreplaced in Project Year 13 is five years. Thus, the residual value of theequipment in Project Year 15 is 5/8 z $10,100.000 = $6.313.000.

2. Recurring Costs/Cost Savings

a. Personnel

(1) Personnel requirement determination. To determinepetrosmel requirements, first, the current number of pils el employed ineach activity of the Cataloging Division is determined .111 . Second. the

A-3

asib of persnnel -sed by implementing the AIS proposal is computed basedwp fe elimination of required activities and the subsequent reduction in

pavmm" requirmnoto. These a;i4vities include document routing and control.one 0". adquality control' 0 The difference between current personnelvdr saasd persoenel sowed gives the personnel requirements for the AISpropsal. Table A-3 provides a breakdown of personnel requirements by canterto beth alternatives as well as the personnel saved if the AIS is

Table A-3 [1 5 1

PUSOuuI REQUIRED, SAVED

Personnel Personnel PersonnelRequirments Saved Requirements

CNMAlternative A Alternative B Alternative B

SC116 36 80IC145 38 107UC78 17 61

bloc 77 33 44DWC96 15 81

TAS512 139 373

(2) Personnel cost determination

It is detrmined that the GS-7 level. step 4(10]. salary of $19.606[14] shouldbe used for cmputing Item Identification and Cataloging personnel costs. Insidton. frimal~lnef it s are to be computed using the current DLA rate of363 fol Ma~Pnagement overhead is determined to be 101 ofMSTY 0AJ Thus. personnel costs are calculated as follows:

Persommel costs z nmber of personnel x salary + (fringe benefit I+ manag eme nt overhead 2) x salary

Tables "- threegh A-6 provide personnel costs for both alternatives and forperasonnel costs Savings if Alternative 3 is implemented.

The -W squipeent will be installed in 1188 and FY9. The equipment will beonly pertially operational during this time and, thus. the cost Strings areprevated for thece two years. Five percent of the personnel cost savings willbe realised in Project Year 3 (FY88) under Alternative 3, 501 of the personnelcont "svi fs Project lear 4 (Mg8).* and 1001 of the personnel cost savingspbseetrI a Tble A-7 shows calculations for personnel costs and costsrt"s by projet year.

b. Nhi ware Mitenance. Xn addition to Initial software purchaseeaota ue Alternative 1, there will be recurring costs of $20.000 anuallyfew sosesiiu software," by IRA headquarters and DEC personnel.

A-4

I AbLE A-4PERSONNEL COsrs/YEAR

ALTERNATIVE A

PERSONNEL UNADJUSTED ACCELERATE PERSONNELCENIER REQUIRED SALARY Tor SALARY FACTOR * cosrs

DCSC 116 19,606 2,274,296 1.462 3,3259021DESC 145 19,606 2,842,870 1.462 4,156,276DGSC.. 78 9o606 1o529,268 1.462 2,235,790DISC 77 19,606 1,509,62 1.462 2,207,126DPSC 96 19,606 1,9882,176 1.462 2,751,741

DLA 512 10,038,272 14,675,954

TABLE A-5PER ONNEL COSTS/ YEAR

ALTERNATIVE B

PERSONNEL UNADJUS fED ACCELERATE PERSONNELCENTER REQUIRED SALARY TOT SALARY FACTOR * COSTS

--------------------------------------------------------------DCSC 8 19,606 1,568,480 1.462 2,293,118DESC 10/ 19,606 2,097,842 1.462 3,067,045DGSC 61 19,606 1,195,966 1.462 1,/48,502DISC 44 19,606 862,664 1.462 1,261,215DPSC 81 19,606 1,588,086 1.462 2,321,782

-------------------------------------------------------------------------DLA 373 /,313,038 10',691,662

tABLE A-6PERSONNEL SAVINGS/YEAR

PERSONNEL UNADJUSTED ACCELERATE PERSONNELCENTER SAVED SALARY rOT SALARY FACTOR * SAVINGS

-------------------------------------------------- -----------------------DCSC 36 19,606 705,816 1.462 1,0-1,903DESC 38 19,606 745,028 1.462 I,O9,231DOSC 17 19,606 333,302 1.462 487,288DISC 33 19,606 646,998 1.462 945,911DPSC 15 19,60& 294,090 1.462 4 9,960

----------------------- --------------------------------------------------OLA 139 2,?25,234 3,914,29492

*ACCELERATION FACIOR - 1.462 FOR FRINGE BENEFIr ADJUSTHENT + .10 FOR

MANAGEMEN [ OVERHEAD COST ADJUSTMEN I

'-S

c. squipment Maintenance

74W Alternative A. the maintenance costs are for the Pour- base computers.Debaese m1ectresics Supply Center (MC) ideatif led the anual maintenancecomes for this equipment as $1860 .since the Pour-Phaam System is ineffect at the harbaere ceotors and DPSC. the annual maintenance costs or* 5 z*18,600 or appromimately *93.000.

Table A-7

PRCEATON OF FUSC. CWO/COST SAVIUGS

Project Alternative A Alternative 3Year Personnel Costs Personnel Costs Persosnel Savigas

1-2 $1467U1 $14676K 0

3 $146761 $146761- 1999 .05 z $3984K

$14477K $199K

4 $14676K $14676K

- 19929 .50 z $39M4

5-10 $14676K $106921 MW64

Pot Alternative B. the minicomputers and workstations will have to hemaintained. In project Year 3 (MY8).* the computer equipment will hepartially installed. and the maintenance costs for the compter equipment areestimated to be $20.000. In Project Year 4 (Mg8), Installation of allequipment viii be cmpleted. Thus. beging il 4Project Year 4, annulmaintenance costs are estimated to be *200.000'~

d. Travel, Pot Alternative 3, them conts Include airtransportation between MA Ueadquarters. the DMs DMC ILEC, and MAC pluslodgin, meals, sd lecal transportation. Staitighs proj ect 'feew (IM),travel coets will be apprefiately $2.000 ansully'~

a. Supplies. Annual eosts for supplies f or beft alternatives areestimed to be appremimately the sm. Supplies fee Alteinative A includepecets., forms, micredln. and hardcop paper. $applies for Alterastive 3include lastr didtq pod ether compter supplies. DIC inmal supply costs .pe(VIM) ware $5,0001 . Tbua. the apU~j ~ a awe estimated at 5 a $5.6" Or*25.66 emmelly for beth alternativesIO

APPENDIX B

KO01WC ANALYSIS - kb INVSTiENTS FOAT A457 of Pald am ($000)

I. Sema" O CAWAV Defense Logistics Agency (Hq)

&A oea 4 August 1986PCTOL AIS EA

4. WN~.dh~qO _Improve Processing Times, Work Quality & Control

9 .4Jlmtd~eeb Current Operations G_ _ _ _ _ _

'4 . eCTOL AIS b. 6 ,eAW 11 years

(000"04"s1 Coal

PRMITT I6?OPOM 0lrMISffiNTALIRA ALTUAIMV ALTERMATIVE COST FACTOR Cos

1 14794 14794 0 .954 02 14794 14794 0 .867 03 14794 14615 179 .788 1414 14794 12909 1885 .717 13525 14794 10939 3855 .651 25106 14794 10939 3855 .592 22827 14794 10939 3855 .538 20748 14794 10939 3855 .489 18859 14794 10939 3855 .445 1715

12. tOTALS CONTINUED CONTINUED CONTINUED CONTINUED CONTINUED

.- fPrf Vww - " -w or WUWT,

o. fA.Wq e efA S. --.. -. 00Wqf40 0 S .. ..00 0 0

s. ftW AiiiiV i*f Cfst -of S ft050 0 O000 OSS

. M w eI " mp a M. .... .. ......... Coos.. ..

I. row NOuWow V~ --o b 0e A . ......................

to. ^wow - e a a 0 0 osoos so s fto ....C.os

W- £tAS' MA Of O CAW P 04018000 ..........

in. W A*w, sw0.. . . . .. . .tO. I#.g'binm - fSM ebmm $m ' ........................

m. ~ 0 *151Cee m, 0,05 000 0 z 00 o C . .. . ......

* s covgmPmrN PmmeO @oC1: 108 q6mSfS

1-1 I

KONOMI ANALYSIS - bob EVESTAINTS F@UAI A45y~o Foodju Cn ($000)

a. -#w raw -

4. ampwbo of h*A *ueWV

I& a. dP_ ___ ___ ANW* &Ab£______

b. ~ueE A~w . f f £

7 9 10 11

micum"muS

a&Tow""Vt ALTESATWE cosT F&CmW 7

10 14794 10939 3855 .405 156111 14794 10939 3855 .368 141912 14794 10939 3855 .334 128813 14794 10939 3855 .304 117214 14794 10939 3855 .276 106415 14794 10939 3855 .251 968

U-. TOTftS 221910 174144469 ________ 19431

11. MEU7 9 WMWo ~W WTMto#sw8&o~ ... ~----------- ------- f 10

F&W ~ ~ ~ ---- Nes 500w of550 ft a sfs0,0,

IS. asd -AP oo &t SAnS t*## 1.585V^4W

is. &M h1k of gbMvse Mwb~O -----

IT- &tM ~ - - 19,431

81. .... - .. -19,52 7

0U.S. @ovem"6to Pmwm iuG CU mCs 76*aw4UNS

9-2

APPENDIX C

Reference.

1. Application Study. Cataloging Tools On-Line, DLA Systems AutamationCenter (DSAC). Control Number A908.

2. Accelerated Catalosinfhllechanized Entry (ACME) Feasibility and Costenef it Analysis, '.Final Report. 2 February 1984. Office of

* Tleleowuications and Information Systems (OTIS).

3. Econanic Analysis. DLAM 7041.1. May 1985, Chapter 3 (p. 2). Chapter 5(pp. 1-4). Chapter 13 (pp. 1-2). Chapter 14 (pp. 1-3).

4. Econonic Analysis for Decision Making. U. S. Army Mangement EngineeringTraining Agency, January 1985. Chapters 7-8 (pp. 71-101).

5. Cataloging Tools On-Line Functional Description. DSAC, 4 December 1985.

6. ADP Sysemx Eapineering/Technical Support Services. SAMU ModernizationPrelistinary Economic: Analysis. final Report. OTIS.

7. Office of Mmasevient and Itaomt Circular No. A-94 (Revised).27 March 1972. Disecount Rates to be Used in Nhamneting Time-DistributedCosts and Nesief its.'

S. DLA-ZI, Dennis Weretick correspondence, July 1986.

9. "Systea Analysis and Requiremento Docment (SAW) for Cataloging ToolsOn-Line, (CTWO). 27 febr-uary 1936. DSAC-Of.

10. 513-N Project Developue~t flan. 1 December 1985.

It. *DA-088, Telepbowe couvereaties between J. V. Nickaa and Jan Rider,Augut 1986.

12. 'Nsumagumt Cost Account Structure', MLAN 7000.1. Change 10. MOO0Aceemts.

13.* NA Moamsest Swimemorime Standarft (DIM). So -mer IM3.

14. Off ie *9 Perosemel HMamgment. Pay Table for 0-ssial Sedule (W) Gradesfor These PaMd Dew Toe Uos.

15. 3LA-U. Telephon couersetieeis boet Dennis Neret ek sand Joe Rider.meet loss.

c-1

/4