REPORT DOCUMENTATION PAGE OMB

1 Form ApprovedREPORT DOCUMENTATION PAGE OMB No. 0704-018 Public re orting burden for this oiiectOn of riformation s estim&ated to average I hour Der resporse. including the time for reviewing instructions, searching existing data sources,gathering and maintaining the data needed, and completing and reviewing the collection ci information Send comments regarding this burden estimate or any other aspect of thiscollection of information, mncluding suggestions for reducing this Ourden to Nashington Headquarters Services. Directorate for information Operations and Reports. 1215 JeffersonDavis Hiighwav, Suite 1204.

2 Arlington, VA 22202-4302. and to thre Office of Maragement ind Budget, Paperwork Reduction Project (0704-0188). Washington. DC e R11. AGENCY USE ONLY (Leave blank) 2. REPORT DATE 3. REPORT TYPE AND DATES COVEREDI September 1993 ADODCAS 19934. TITLE AND SUBTITLE 5. FUNDING NUMBERS- 6. AUTHOR(S)C 1 -7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) B. PERFORMING ORGANIZATION__ d "- ..n REPORT NUM BER9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDSS(S)T 10. SPONSORING/ MONITORINGAGENCY REPORT NUMBER11. SUPPLEMENTARY NOTESA nnual Department of Defense Cost Analysis Symposium Paper12a. DISTRIBUTION /AVAILABILITY STATEMENT 12b.

3 DISTRIBUTION CODES tatement A: Approved for Public Release; Distribution is Unlimited13. ABSTRACT (Maximum 200 words)See OverDTIC QUALITM INSPECED L14. SUBJECT TERMS 15. NUMBER OF pages ,,,,-/ -o , " 16. PRICE CODE17. SECURITY CLASSIFICATION 1S. SECURITY CLASSIFICATION 19. SECURITY CLASSIFICATION 20. LIMITATION OF ABSTRACTOF REPORT OF THIS PAGE OF ABSTRACTU U U ULNSN 7540-01-280-5500 Standard Form 298 (Rev 2-89)Prescribed by ANSI Std FOR ESTIMATING CONSUMABLE AND DEPOTLEVEL REPARABLES COSTPURPOSE: The purpose of this paper is to provide guidance for including surcharges and credits in costestimating for Depot Level Reparables and Consumables in Baseline Cost Estimates (BCE), IndependentCost Estimates (ICE), and other cost estimating : Two critical components of the Army Cost and Economic Analysis Center's(USACEAC) mission are to develop and disseminate cost and economic policy.

4 And to providetimely/quality cost and economic analysis support to the Planning, Programming, Budgeting, andExecution System (PPBES) and the Army Staff decision making cost estimating procedures are required because of two important DMRD changes: the inclusion ofsurcharges in Army Master Data File (AMDF) prices and the change from procurement funding tooperations and maintenance funding for Replenishment DLRs under the Supply Management, Army(SMA), formerly Army Stock Fund (ASF).Specifically, DMRD 904 "Stock Funding of Reparables" affected the cost element structure and thedefinition of costs components used in Army resource management, particularly in the management ofoperating and support costs.

5 Under this concept, units no longer receive replacement DLRs as free , cost analysts must account for surcharges and credits when developing a system's life Anne Army Cost and Economic Analysis Center Acc>icj:i For5611 Columbia PikeFalls Church, VA 22041 N NTJS (7 7, 1 DSN 289-0336i tGUIDANCE FOR ESTIMATINGCONSUMABLE ANDDEPOT LEVEL REPARABLES COSTAnne P. Twist Army Cost and EconomicOperations Research Analysis CenterAnalyst 5611 Columbia PikeFalls Church, VA 2204194-04945o A 0 , 0 R Vi""GUIDANCE FOR ESTIMATING CONSUMABLE ANDDEPOT LEVEL REPARABLES COSTPURPOSE: Recent Defense Management Review Decisions (DMRDs) havenecessitated a change to cost estimating procedures for Consumablesand Depot Level Reparables (DLR).)

6 The purpose of this paper is toprovide guidance for including surcharges and credits in costestimating for Depot Level Reparables and Consumables in BaselineCost Estimates (BCE), Independent Cost Estimates (ICE), and othercost estimating : Two critical components of the Army Cost andEconomic Analysis Center's (USACEAC) mission are to develop anddisseminate cost and economic policy; and to providetimely/quality cost and economic analysis support to thePlanning, Programming, Budgeting, and Execution System (PPBES)and the Army Staff decision making cost estimating procedures are required because of twoimportant DMRD changes: the inclusion of surcharges in ArmyMaster Data File (AMDF) prices and the change from procurementfunding to operations and maintenance funding for ReplenishmentDLRs under the Supply Management, Army (SMA), formerly Army StockFund (ASF).

7 Both changes became effective in FY 92 and fallunder the umbrella concept of the Defense Business Operating Fund(DBOF).Specifically, DMRD 904 "Stock Funding of Reparables"affected the cost element structure and the definition of costscomponents used in Army resource management, particularly in themanagement of operating and support costs. Under this concept,units no longer receive replacement DLRs as free , cost analysts must account for surcharges and creditswhen developing a system's life cycle costs. This presentationaddresses the modified procedures used to cost materiel systemsthat were provided in the ANNE P.

8 TWIST, Army Cost and Economic Analysis Center,5611 Columbia Pike, Falls Church, VA 22041, DSN FOR INCLUDING SURCHARGES AND CREDITSIN COST ESTIMATES FOR DEPOT LEVEL REPARABLES AND CONSUMABLES1. References:a. Cost Analysis Manual, August 1992, Memorandum, OASA (FM), 28 May 1991, subject:Policy/Guidance for Cost Estimating DCA-P-92(R), 15 May 1984, subject: Instruction forReformatting the Definitions: A glossary of terms and pertinent definitionsare at Attachment Purpose: To provide background and procedures for estimatingthe cost of a Depot Level Reparable (DLR) and Consumable inBaseline Cost Estimates (BCE), Independent Cost Estimates (ICE),and other cost estimating products.

9 (Note: This guidance alsoapplies to the most recent cost estimating products described inthe new DODD , including the Program Office Estimate(POE) and the Component Cost Analysis (CCA) .]4. Background:a. The recent downward trend in dollar resources availablefor defense precipitated a change in the way the Army manages itsresources. Supply and maintenance alone consumes 10 percent ofthe Army's resources. In order to more efficiently utilize theseresources, a basic two pronged approach was implemented; reduceunit demands to only those things that cannot be fixed, andreduce the total cost of providing unit supplies by improving theefficiency in the delivery of Stock funding of DLRs affords the Army the benefit ofimproved secondary item inventory management and financialmanagement.)

10 Instead of having one appropriAted fund forprocurement and another for repair, the Supply Management, Army(SMA), formerly the Army Stock Fund (ASP), funds both. Theaccounting and reporting functions for the AS? is decentralizedand performed at the branch office/MSC Several key policy decisions changed the way costestimating for DLR (Spares) and Consumables (Repairs) is were changes in terminology, stock fund procedures, andsurcharge and credit (1) Terminology. Beginning in FY 92, all secondaryitems were realigned into two categories: reparables ( , SFDLRs) and consumables. Reparables are somewhat similarto the former spares, and consumables are somewhat similar to theformer repair parts.