Cost Analysis Manual - AcqNotes

1 Department of the Army cost Analysis Manual Army cost and Economic Analysis Center MAY 2001 MAY 2001 i FOREWORD A major objective of the Army's cost and Economic Analysis Program is to improve the justification and documentation used to effectively allocate and manage Army resources. To attain this objective, we must develop more accurate cost and economic analyses of Army programs, materiel systems, installations, facility acquisitions, automated information systems, forces, and activities.

2 This Manual provides basic frameworks for methodologies and procedures to implement policies for better cost analyses. The specific goal of this Manual is to help the cost analyst serve the customer. This Manual is the result of the combined efforts of the Headquarters Department of the Army, the Major Commands, and Program Executive Officers. The format is designed to facilitate updating and expanding the Manual , as necessary. Therefore, this publication should be considered a "living document" which will serve as a vehicle to disseminate current cost and economic Analysis guidance.

3 This is a continuing effort; additional or revised materiel will be forwarded as it is completed. I believe you will find this edition of the cost Analysis Manual a valuable and useful aid in understanding and participating in the cost and economic Analysis process. Your ideas and suggestions for improving this Manual are always welcome. Comments and suggested improvements may be provided to Director, Army cost and Economic Analysis Center, ATTN: SFFM-CA-CP, 1421 Jefferson Davis Highway, Suite 9002, Arlington, VA 22202-3259, phone (703) 601-4185 or DSN 329-4185.

4 Robert W. Young Deputy for cost Analysis OASA(FM&C) MAY 2001 ii TABLE OF CONTENTS CHAPTER 1 - 1-1. 1-2. 1-3. EXPLANATION OF ABBREVIATIONS AND 1-4. INTRODUCTION TO cost 1-5. cost Analysis REQUIREMENTS, USES, AND 1-6. ECONOMIC 1-7. cost Analysis 1- 8. INTERNAL 1- 9. cost Analysis CHAPTER 2 2- 1. 2- 2. INTERRELATIONSHIP WITH THE DEFENSE ACQUISITION 2- 3. INTERRELATIONSHIP WITH THE PPBS 2- 4. INTERRELATIONSHIP WITH THE CONTRACT CHAPTER 3 cost Analysis PROCESS, METHODS AND 3- 1. 3- 2. THE ANALYTICAL 3- 3.

5 cost -ESTIMATING 3- 4. ESTIMATES IN CONSTANT, CURRENT, AND DISCOUNTED 3- 5. cost -ESTIMATING DATA 3- 6. SOFTWARE cost 3- 7. cost AS AN INDEPENDENT VARIABLE (CAIV)..39 3- 8. RISK AND UNCERTAINTY 3- 9. SENSITIVITY 3-10. VALIDATION 3-11. INTERFACE WITH ENVIRONMENTAL AND HAZARDOUS MATERIAL IMPACT 3-12. cost -ESTIMATING 3-13. INHERITED 3-14. RESIDUAL OR SALVAGE CHAPTER 4 MATERIEL SYSTEMS cost 4- 1. 4- 2. cost Analysis REQUIREMENTS DESCRIPTION (CARD)..48 4- 3. WORK BREAKDOWN STRUCTURE/ cost ELEMENT STRUCTURE (WBS/CES)..50 4- 4.

6 MAJOR MATERIEL SYSTEMS' cost 4- 5. DOCUMENTATION 4- 6. cost REVIEW BOARD (CRB)..69 4- 7. ARMY SYSTEMS ACQUISITION REVIEW COUNCIL (ASARC)..75 4- 8. cost Analysis IMPROVEMENT GROUP (CAIG)..78 4- 9. SELECTED ACQUISITION REPORT/UNIT cost REPORT (SAR/UCR) 4-10. PPBES SUPPORT 4-11. CONTRACT SUMMARY CHAPTER 5 MATERIEL SYSTEMS SPECIAL 5- 1. 5- 2. UNIT cost 5- 3. Analysis OF ALTERNATIVES (AOA)..87 5- 4. UNIT cost , ARMY WORKING CAPITAL FUND (AWCF), AND 5- 5. INTERFACE WITH INTEGRATED LOGISTICS SUPPORT (ILS) AND LOGISTICS IMPACT Analysis (LIA).

7 91 MAY 2001 iii 5- 6. INTERFACE WITH PROGRAM 5- 7. FINANCIAL 5- 8. OPERATING AND SUPPORT MANAGEMENT INFORMATION SYSTEM (OSMIS)..91 5- 9. SUNK CHAPTER 6 ENVIRONMENTAL QUALITY 6-1 6-2 ENVIRONMENTAL QUALITY cost METHODS AND WORK BREAKDOWN 6-3. ENVIRONMENTAL QUALITY cost ESTIMATING 6-4. ENVIRONMENTAL QUALITY cost ESTIMATING CORE 6-5. RESIDUAL OR SALVAGE 6-6. TRENDS IN THE ENVIRONMENT QUALITY IMPACTING THE cost CHAPTER 7 FORCE 7- 1. 7- 2. 7- 3. ANNUAL 7- 4. 7- 5. 7- 6. 7- 7. 7- 8. FORCE AND ORGANIZATION cost ESTIMATING SYSTEM (FORCES).

8 125 APPENDIX A - SECTION I - REQUIRED SECTION II - RELATED APPENDIX B FIGURES AND APPENDIX C cost Analysis DEFENSE ACQUISITION OTHER APPENDIX D MATERIEL SYSTEMS PME GENERIC WORK BREAKDOWN APPENDIX E cost ELEMENT SECTION I - cost ELEMENT SECTION II - cost ELEMENT APPENDIX F cost Analysis SECTION I - MANPOWER SECTION II - GUIDANCE FOR INCLUDING SURCHARGES AND CREDITS IN cost ESTIMATES FOR DEPOT LEVEL REPARABLES AND ANNEX A - APPENDIX G FORCE cost MODEL ELEMENT STRUCTURE AND SECTION I - FORCE cost MODEL ELEMENT SECTION II - FORCE cost ELEMENT APPENDIX H - STUDY APPENDIX I - cost Analysis REQUIREMENTS DESCRIPTION (CARD).

9 177 APPENDIX J - ARMY cost ESTIMATING MAY 2001 iv SECTION I - AUTOMATED cost ESTIMATING INTEGRATED TOOLS (ACEIT)..179 SECTION II - AUTOMATED cost DATA BASE (ACDB)..179 SECTION III OPERATING & SUPPORT MANAGEMENT INFORMATION SYSTEM (OSMIS)..179 APPENDIX K cost RISK 1. 2. 3. RISK AND 4. REQUIREMENTS FOR RISK ASSESSMENT AND 5. ELEMENTS OF 6. APPROACHES FOR ESTIMATING cost 7. SOFTWARE MODELS FOR ESTIMATING 8. APPENDIX L DOD KEY cost SECTION I - SECTION II - CHAPTER 1 - INTRODUCTION MAY 2001 1 CHAPTER 1 - INTRODUCTION 1-1.

10 Purpose a. This Manual provides basic methodologies and procedures for implementing cost Analysis policies. It is one part of the essential set of instructions for analysts working in the cost and economic Analysis area. Another part, Army Regulation (AR) 11-18, The cost and Economic Analysis Program, specifies the policies and responsibilities for cost and economic Analysis throughout the Army. The last part, Department of the Army Economic Analysis Manual , provides the methodologies and procedures for implementing economic Analysis policies.