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Weapon System Sustainment: Collection of Contractor Costs

Weapon System Sustainment: Collection of Contractor Costs. Walt Cooper OSD Cost Analysis Improvement Group (CAIG) August 13, 2008. Outline. Background and purpose Current status Issues Next steps. O&S Costs Represent Largest Fraction of Life Cycle Costs, by Far. O&S. RDT&E. Procurement.

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Weapon System Sustainment: Collection of Contractor Costs

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  1. Weapon System Sustainment:Collection of Contractor Costs Walt Cooper OSD Cost Analysis Improvement Group (CAIG) August 13, 2008

  2. Outline • Background and purpose • Current status • Issues • Next steps

  3. O&S Costs Represent Largest Fraction of Life Cycle Costs, by Far O&S RDT&E Procurement

  4. O&S Cost Analysts’ Major Responsibilities • Preparation of life cycle cost estimates • Formulation of budgets and programs • Analysis of working capital funds • Development of business case analyses • Support of contract negotiations Success depends on analysis of actual O&S costs organized in a standard O&S Work Breakdown Structure (WBS)

  5. The Source of O&S Actuals:Visibility and Management of Operating and Support Costs (VAMOSC) • Only source of ready data on actual operating and support (O&S) costs of weapon systems • Evolution • In 1974, Military Departments began developing programs for collection of actual O&S costs • Initial systems largely manual • In mid-1990s, Military Departments introduced automation • Army OSMIS (Operating & Support Management Information System) • Navy: Naval VAMOSC and USMC VAMOSC • Air Force Total Ownership Cost (AFTOC) • Today, VAMOSC systems are state-of-the-art information systems with growing numbers of users • Data provided in standard WBS

  6. Today’s VAMOSC Program More than 2,500 active users across DoD.

  7. An Illustration – The Navy’s F-18C($M, FY 2005 constant) Historically, contractor support has represented a small percentage of O&S costs. But that is changing…

  8. Current Trends • Greater reliance on industry partners for sustainment • Many forms -- traditional Contractor Logistics Support (CLS), PBL, DVD • More use of public-private maintenance partnerships • Establishment of Product Support Integrators • Industry supports sustainment of a growing number of aviation systems • MRAP JPO relying extensively on industry for sustainment of MRAP in theater

  9. F-22A O&S Costs (Then-year dollars in millions) Sources: AFTOC, AFMC 778 AESG/FM

  10. Demand for CLS data is growing… top queries in FY 2008 for OSMIS

  11. About The Project • Objective: To recommend policy and procedures for collection of contractor costs in weapon system sustainment arrangements • To be completed in FY 2009 • Collaborative effort among the CAIG, OUSD (AT&L), and all military departments

  12. Current Status • Currently, numerous programs have proposed CSDR plans • Working these on a case-by-case basis • Plans map to O&S Cost-Estimating Guide WBS • Long term • Establish formal regulatory requirements • Draft DoDI 5000.2 establishes requirement for sustainment contract cost reporting • AR 700-142 (approved 26 Mar 08) requires program offices to provide O&S costs • Develop formats and procedures for collection • Draft to be vetted with military departments this summer • Will conduct workshops with selected program offices • Global Hawk (August 14) • JSTARS (August 15) • T-45 (August) • Stryker (?) • Maintain dialog with industry

  13. CSDR Sustainment Plans

  14. CSDR Sustainment Plans (Cont’d)

  15. Cost Analysts’ Desired Outcomes • Periodic reports needed -- annual submissions preferred • To be used for updating budgets and programs, analysis of Working Capital Fund requirements • Consistent with VAMOSC system updates • However, must be synchronized with contract milestones • Program and contract plans consistent with CSDR • O&S cost WBS • Other items, e.g, G&A, undistributed budget, fee • Reports submitted directly to DCARC • Subsequently sanitized and incorporated into VAMOSC systems

  16. Issues to Address • Protection of proprietary data • Reporting frequency • WBS/Level of detail • Thresholds

  17. Next Steps • Continue to work with program offices on current plans • Vet proposed standard formats and instructions with departments and industry • Update cost-reporting appendix to DoD 5000.4-M, “Department of Defense Cost Analysis Guidance and Procedures Manual”

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