o&s cost estimating jhp case study 1 unclassified notional data for notional program

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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.


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O&S

UNCLASSIFIED notional data for notional program

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


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


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


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


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


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.


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


1.0 Unit level Manpower

2.0 Unit-level Operations

3.0 Maintenance


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.

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aint

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6.1

Inst

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4.0

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2.3

TDY

6.3

Gen

Tra

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Edu

6.2

Pers

Sup

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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


“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 $ -


PMO-funded O&MPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)

Required1 $ Delta $ (Current-Required) - - - - - - - - - - -

MILPERSPrior $ (PB15)Current $ (PB16) Delta $ (Current - Prior)

Required1 $ -


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


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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


http://www.dau.mil/

o&s cost estimating jhp case study 1 unclassified notional data for notional program

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