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O_S Cost Analysis Examples - DODCAS

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					     DoDCAS
Weapon System O&S
   Affordability




     Gus Anderson
    OSD CAPE ASCA
                         Background

• CAPE CA provided DCAPE cost analyses of MDAPs for
  decision-making processes
   –   Objective
   –   Estimate Life Cycle Costs
   –   Focused on COST (vice capability)
   –   Use VAMOSC data bases


• Only as good as the data

• Goal – Assess Life Cycle O&S Affordability




                                                      2
Win the Lottery – Buy a house!




      Build Price: $2.5M (1902)
  Sale Price: $2.5M (1973-adjusted)

                                      3
                    DoD Historical Data
         post-Vietnam            post-Cold War
800       1967-1975                1985-1998                   7,000

700                                                            6,000

600
                                                               5,000




                                                                       Endstrength (K)
500
                                                               4,000
400
                                                               3,000
300

                                                               2,000
200

100                                                            1,000


 0                                                             0
  1962        1972        1982       1992         2002
                Topline    O&M   Procurement     Endstrength


                                                                                         4
Example 1: Littoral Combat Ship (LCS)




                                        5
                                          LCS
• Original Acq Strategy was to compete two seaframes, award a winner
  and sustain both for the life cycle.
   – Missed opportunity to divest second (losing) seaframe (25 yrs of sustainment of
     unique ship)
• However…
   – Navy awarded “Dual” contracts for each shipbuilder to build 10 ships each


• Also, Mission Modules would be treated as separate ACAT 1D Program
   – Unprecedented acquisition approach to ship building
   – Three Primary Mission Areas: Mine Countermeasures (MCM), Surface Warfare
     (SUW), Anti Submarine Warfare (ASW)
• LCS with a Mission Package embarked will replace currently fielded
  systems
   – Apples to apples comparisons are challenging
   – Capability deltas difficult to quantify; new capabilities being introduced
   – Other Programs of Record (PORs) contribute to conducting mission



                                                                                       6
         Annual O&S Comparisons: 1st Take
$4,000



$3,500                                                        Mission Module
                                                               Maintenance
$3,000
                                                                   (High)
                                                              Mission Module
                                                               Maintenance
$2,500                                                             (Low)
                                                              Mission Module
                                                                 Manning
$2,000



$1,500
                                              Marine Mammal
                       MH-53                                       LCS
$1,000                                        PC-1 10 Ships
                  MCM-1 14 Ships                                 55 Ships

 $500                  FFG-7
                      20 Ships
   $-
            FFG/MCM/PC/MH-53E/Marine Mammal                         LCS



 LCS fleet will require ~125-250% more O&S funding - per year to operate and
                       sustain than equipment its replacing

                                                                               7
        LCS focus on MCM: Closer Look

• Look at specific platforms today that conduct MCM
   – MH-53E (needs an LHA, LHD or LSD)
   – MCM-1 Avenger Class
   – Marine Mammal Program
• Vs LCS MCM Mission Package
   –   LCS Seaframe
   –   LCS MCM Module
   –   MH-60S
   –   MQ-8B


• Still not completely fair; LCS MCM has more capability
   – More waterspace, faster sweep and clear
   – Difficult to quantify

                                                           8
Mine Countermeasures Annual Mission Cost
 1000
                                    24 MQ-8B
                  24 MH-60S          VTUAV
 900             AMNS,ALMDS         - COBRA
                AQS-20A, OASIS
 800

 700

 600                                 Marine Mammals

               21 LCS Seaframes        LHA/D & LSD
 500                                                       30 MH-53E
               24 MCM Mission                               MK 103-6
 400                                                         AQS-24
                  Modules
                                                            ASQ-232
 300               RMMV                                    SLQ-37/38
                    USV
 200             SMCM UUV                                14 MCM-1 Ships
                                                             SLQ-48
 100                                                         SQQ-32
                                                            Diver Det
   0
              LCS Mission Package                     MCM/MH-53E Package
 Proposed MCM Program unaffordable compared to current force structure

                                                                           9
       LCS MCM Mission Packages
1000

900
        • Reduction of LCS Seaframes to 12 and
          Helos/Mission Modules to 16 brings O&S
800
          costs (roughly) to current levels
700

600

500        16 MH-60S
                                       30 MH-53E
                                        MK 103-6
400      12 LCS Seaframes                AQS-24
         16 MCM Mission                 ASQ-232
300          Modules                   SLQ-37/38
200          RMMV
              USV                    14 MCM-1 Ships
100        SMCM UUV                      SLQ-48
                                         SQQ-32
  0
        LCS Mission Package        MCM/MH-53E Package




                                                        10
Example 2: Global Hawk & U-2




                               11
                     Global Hawk

• RQ-4B Global Hawk UAV designed to assume High
  altitude ISR mission from U-2
• Basically 2 variants –
   – RQ-4A (Blk 10, EO/IR) – currently divested
   – RQ-4B (Blk 20 BACN/Blk 30 EISS/ASIP/Blk 40 MP-RTIP)
• Blk 10 annual O&S costs more efficient due to
  maturation
• Blk 20 IOC in 2008 started at much higher O&S cost and
  becoming more efficient with maturity




                                                           12
               Through 2QFY11: 1st Take
•   Global Hawk Cost/Flying Hour 33% greater than U-2 in 2010 and trending up
     – $44K /FH vs. $27K /FH
     – SASC direction to sustain U-2 until GH O&S reduced below that of U-2
                                              Way Forward
                                              • CLS Contract analysis
                                              • Identify possible GH
                                                efficiencies
                                              • Analyze effects U-2
                                                maintenance concept
                                                change




                                                                                13
             GH vs U2 Cost per Flying Hour
$45,000      6.0-Ind Support
                                                                      TU-2/T-38
             4.0-Sust Support
$40,000                                                                Added
             3.0-Maintenance
             2.0 - OPS
$35,000
             1.0 - Personnel

$30,000                                                               CLS Cost
                                                                       Driver
$25,000


$20,000


$15,000
                                                                       More
                                                                      Manning
$10,000                                                               For GH

 $5,000


     $-

          GH U2     GH U2       GH   U2   GH    U2   GH U2    GH U2
           2006      2007        2008       2009       2010    2011
                                                                                  14
Example 3: Joint Strike Fighter




                                  15
       Joint Strike Fighter Cost per FH Comparison
                                                           O&S Cost per Flight Hour
                 Legacy Actuals (FY08-10) vs. JSF (Steady State) - Excluding Indirect Support & CGAI
                 Note: Mission personnel costs for DoN legacy aircraft based upon authorized billets and FY11 OSD Composite Pay Rates.
                       Fuel prices for legacy aircraft adjusted to match current DESC fuel prices utilized in JSF estimate.
        $70K


        $60K


        $50K


        $40K
FY11
$/FH
        $30K


        $20K


        $10K


          $0K
                AV-8B    FA-18C     FA-18D      FA-18E     FA-18F                 F-15C/D      F-15E     F-16C/D     F-22A                USAF     USMC      USN
                                                                                                                                         (CTOL) (STOVL/CV)   (CV)

  FH/PAA/YR      232       348         272         341        380                    201        327         267         187               250       300       315

 PAA 3 Yr Avg    126       277         106         148        181                    314        318         980         117               1,325     352       227


                                                                                                                                                                    16
                  F-35 vs. Legacy O&S Cost
                                    Annual O&S Cost
                                    Excludes Indirects & CGAI

$18.0B                                                          $16.8B
                                                                  CV

                                                                STOVL
$12.0B                                                           /CV
                     $10.2B

                      F-16C/D

 $6.0B                                                           CTOL
                      F-15C/D

                      F-18C/D

 $0.0B                AV-8B
                      Legacy*                                    JSF**
* AFTOC & VAMOSC: Average FY08-10
** 2011 CAPE Estimate
                                                                         17
                                    Cost Growth Above Inflation (CGAI)
                                             DoD's Overall Weapon System Buying Power Loss
                                                                               Inflationary cost growth for DoD weapon system
                       45%                                                      providers (2-3% per year above DoD deflators)


                                                                                                             DOD's weapon
                       35%                                                                                   system buying
                                    Inflationary labor cost growth                                           power loss has
                                     for US commercial industries                                             been 20-30%
% Increase from 2001




                                      (1-2% per year above DoD                                                over the last
                       25%                    deflators)                                                         decade

                                                                                                            Basis of DoD's Procurement
                                                                                                            Deflators
                       15%


                                                                                                                PPI Total Manufacturing

                       5%                                                                                       ECI All

                                                                                                                TOA Procurement
                             2001    2002   2003   2004   2005   2006   2007    2008   2009   2010   2011

                       -5%

                                                                                                                                          18
                              Affordability Comparison
                                                 DoD Fighter O&S Costs

                                                                                                                CGAI

                                                                                                                Next Gen
                                                                                                                (JSF/F-X/F-18 repl)
                                                                                                                Legacy

                                                                                                                FY10 TOA+OCO

                                                                                                                PAA

                                                                                                                USAF Legacy
                                                                                                                    A-10
                                                                                                                  F-15C/D
                                                                                                                   F-15E
                                                                                                                  F-16C/D
                                                                                                                   F-22A


                                                                                                                 DoN Legacy
                                                                                                                    AV-8B
2010   2012   2014   2016   2018   2020   2022   2024   2026   2028   2030   2032   2034   2036   2038   2040     F/A-18A-D
                                                                                                                  F/A-18E/F




                                                                                                                                 19
                    Summary

• Fiscal environment suggests an austere future
  for DoD’s budget
• A program’s affordability is critical to its long-
  term survival
• Affordability is not limited to the FYDP – life
  cycle costs (LCC) are the “coin of the realm”
• Cost growth above inflation is real and must be
  accounted for going forward
• Affordability can only be achieved by industry
  and DoD working in tandem

                                                       20
Affordability
     Affordability in your LCC Plan
     • Meet your KPPs
     • Low Electric Bill
     • Low Yard Maint (goats)
     • Organic Security (Rottweiler)
     • Low Property Taxes
     • Free Water (well)
     • Eliminate inorganic work force



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