1、MIL-HDBK-257 NI 7777970 OOq77L7 5 W - 2-0 MIL-HDBK-250 (NAVY) 1 APRIL 1983 w -45 Military Handbook LIFE CYCLE COST IN NAVY ACQUISITIONS THPS DNUMENT CONTA1NS it provides access to the contractors design through government LCC reviews; and it affords the Navy an indirect means of controlling the effe
2、ct of the new system or equipment on fleet readiness via a cost-effectiveness type of evaluation. managements cost control and reduction effort. This management tool translates the different elements of an acqulsition into a common basis for measurement and evaluation - dollars, dollars can simplify
3、 management decisions and is essential to an effective cost control effort. not a substitute for decision making but an examination of the probable cost consequences of acquisition decisions. further include readiness and other such benefit considerations. 4.2 Affordability. One of the most persista
4、nt challenges confronting the Department of Defense (DoD) is the ability to provide adequate resources for the acquisition, operation, and support of systems and equipment. In an effort to maintain an effective, modern force in an acquisition environment constrained by finite resources and rising co
5、sts, an affordability acquisition policy has been adopted by DoD. The keystone of the affordability policy is an estimate of the total cost of a program or project over its useful life, i.e. its LCC. Also there is the consideration whether or not one can afford a product which provides a predicted l
6、evel of effectiveness versus a combination of products which provide a different predicted level of effectiveness in a multimission senario or environ- ment. should include the cost of ownership (i.e operating and supporting the fielded product) when making acquisition decisions. Life cycle costing
7、has an important role in the management It gives quantitative guidance in the program and project Therefore, life cycle costing should be an integral part of Describing diverse acquisition elements in terms of However, it should be pointed out that this quantification is A comprehensive management a
8、pproach would In addition to the expected cost of acquiring a product, the manager 4.2.1 Importance of total cost, From a fiscal perspective, the LCC process as applied to an investment opportunity means that alternative courses of action are considered before a set of options is selected, in this c
9、ontext is meant to be an option to take some defined action which will incur cost to obtain some specified future benefit.) During the concept explora- tion phase, many alternative designs and processes are considered as ways to meet the requirements. seem to be prohibitively expensive as a developm
10、ent approach; yet after consid- eration of such factors as subsequent value engineering, producibility, etc., the design approach may be favorable from a production or support standpoint. The point to be made is that the total cost, not just the initial near term costs, should be considered as an in
11、put to the decision process. Conceptually, then, the evaluation of an acquisition can be considered a two step process. selection of the apparent best alternatives is made, costed out and either accepted or rejected (in part based upon a cost-benefit decision). (An investment opportunity used Some o
12、f the more effectual designs, technically, may first First, a Next, the alternatives are 4.2.2 LCC management. functional requirements placed on the acquisition manager, costing is more than just another requirement. Life cycle costing is one of the many simultaneous But life cycle Properly implemen
13、ted it 8 Provided by IHSNot for ResaleNo reproduction or networking permitted without license from IHS-,-,- MIL-HDBK-257 NI = 7777970 OOL17732 1 W MIL-HDBK-259 (NAVY) .- 1 April 1983 becomes a basic way of doing business - making decisions in terms of meeting requirements at the least total cost. Pr
14、operly implemented it integrates other related functional areas with a single cost data mechanism making it easier for the acquisition manager to exercise influence on funding claimants and sponsors,7 so that the major cost drivers are identified, managed, and controlled. following list gives an ide
15、a of the number and variety of planning and decision tasks the acquisition manager faces which call for cost information: The a. acquisition strategy planning b. budget planning and tracking C. d. concept selection establishing performance and quantity requirements e. design and schedule tradeoffs f
16、. g. operational and deployment concept evaluations maintenance and support approach evaluations h. spares requirements determination i. support and test equipment selection j. LCC tracking and monitoring k. contractual source selection 1. special contract provision evaluation m. meeting milestones
17、and acquisition reviews - n. measurement of acquisition progress There is a need for a coherent effort in LCC management to support these decision processes. Effective LCC management plans and implements a LCC program which can assure the reviewing authorities that the acquisition could achieve the
18、lowest LCC (assuming all other requirements are met) and enables the acquisition manager to make the proper design, procurement, and support decsions so that the lowest LCC can be achieved. To be effective, acquisition life cycle costing begins in concept exploration and continues throughout the acq
19、uisition phases. groups the acquisitions LCC tasks into three general areas and relates them to the acquisition phases. management may be found in the “Navy Program Managers Guide“ NAVMAT,P9494.) Figure 1 (More information on the responsibilities of acquisition 4.2.3 Budgeting. The analysis of costs
20、 for alternative investment- opportuni- ties should not be confused with the budget estimating process. While much of the analytical efforts involved in LCC estimating result in information and data which may aid in developing budget submissions or in providing inputs to the programing, planning and
21、 budgeting system (PPBS), life cycle costing is not first and foremost a budgeting process; . Provided by IHSNot for ResaleNo reproduction or networking permitted without license from IHS-,-,- _- - - - - _I MIL-HDBK-259 HI 9999970 0049933 3 MIL-HDBK-259 (NAVY) 1 APRIL 1983 . f (“ o. 0 FIGURE 1. LCC
22、in Navy acquisitions d z F U LT w * I- .z w v) w. z c c 10 Provided by IHSNot for ResaleNo reproduction or networking permitted without license from IHS-,-,-MIL-HDBK-259 (NAVY) 1 April 1983 NIL-HDBK-257 NI 7777770 0097734 5 = 6 4.2.4 External costs. In a typical acquisition environment, authority do
23、es not usually extend as far as the managers responsibility. External factors often drive the LCC. Changes in direction and constraints (e.g. quantity, schedule, funding, and mission) occur frequently. Some acquisition elements may not be under the acquisition managers control (e.g. construction, in
24、stallation, and test equipment). An effective LCC management program provides the necessary visibility and the vehicle which enables the acquisition manager to exercise influence over these externally generated costs. One way to approach problems of this type is to use the acquisition LCC methodolog
25、y with the approval for service use (ASU) review process to cause external funding claimants (e.g. Ship Parts Control Center, Naval Supply Systems Command, Naval Military Personnel Command, and the fleet type commanders) to make appropriate budgetary plans. 4720.9 “Approval of Systems and Equipment8
26、 for Service Use“ requires that funding claimants certify that the expected O for meeting LCC requirements in the procurement process; for using LCC in correlating management decisions with in-house budgeting and the PPBS; and for providing LCC information to meet review and milestone requirements.
27、interacts with and supports other management functions, and it defines the government-contractor relationship including LCC provisions for the statement of work, request for proposal (RFP), data item descriptions, source selection procedures, and resources to support the source selection evaluation
28、board (SSEB) and subsequent LCC monitoring and contractor performance tracking. The LCC plan explains how life cycle costing 13 Provided by IHSNot for ResaleNo reproduction or networking permitted without license from IHS-,-,-MIL-HDBK-257 MI m 7779770 001.17737 O U MIL-HDBK-259 (NAVY) i APRIL 1983 o
29、 3 P W I- u) * u) z O a U w I * Ir. O w A a x * I W * w * o, Y (u A 3 m a I l L d “ * Q O J O O z w w S X W A Ir. O a a 2 r w * z m OD z a W c U Pl FIGURE 3. Sample LCC management report for total responsibility funding Provided by IHSNot for ResaleNo reproduction or networking permitted without lic
30、ense from IHS-,-,-MIL-HDBK-257 NI W 7777770 0049738 2 MIL-HDBK-259 (NAVY) 1 April 1983 4.5.1 LCC technical control. This part of the plan addresses: the management control functions including authority and responsibility for conducting the LCC effort; the schedule and the interfacing milestones; the
31、 specific tasks and the level of effort to be applied; the data flow and the management interfaces among the functions both inside and outside the acquisition office; the government LCC review team; and other related efforts such as reliability, maintainability, DTC, logistic support analysis (LCA),
32、 LORA, ILS, training, support and test equipment, foreign military sales (FMS), subcontractors, vendors, and government furnished equipment (GFE) contractors. 4.5.1.1 LCC tasks. accomplishing the following tasks as applicable (figure 1 summarizes these tasks and relates them to the life cycle phases
33、): The LCC plan should discuss the ways and means of a. management - establish a cost management discipline by developing and controlling the acquisition LCC methodology (tailor methodology to provide design tools and management tools; set ground rules, procedures, and conventions; develop standard
34、data and factors; and establish a common data base); provide special information and assistance (select acquisition strategy which supports the LCC objectives; resource alloca- tion planning and budgeting; influence external costs; and coordinate effort with interfacing areas); establish control pro
35、cedures for in-house and contractor (monitor LCC and DTC objectives and goals); and provide other services (recommend procurement strategy; plan for support required to incorporate LCC and DTC into statement of work, data item descriptions, RFPs, source selection evaluation procedures, SSEB particip
36、ation; and implementing and monitoring special LCC contract provisions). estimating - establish in-house and contractor LCC and DTC capability; establish LCC and DTC baseline; establish LCC and DTC objectives and goals and analyze variances; provide information for management and review preparation
37、tasks; and evaluate alternatives (concept, design, logistics, maintenance, support, alteration, modification, engineering change proposal (ECP), product improvement, force level, multi-year procurement, production rate, operaeing scenerio, deployment, schedule, and quantity). b. C. review preparatio
38、n - define acquisition, logistic, and ASU review requirements; define responsibilities and schedules; and prepare special review estimating procedures. 4.5.2 LCC analysis. This part of the plan sets the ground rules for the analysis procedures. tives, major assumptions, cost estimating techniques, c
39、ost element structure, uncertainty considerations, automatic data processing (ADP) considerations, procedures for updating and verifying LCC data, and-documentation (including tracking and justification of deviations from standardized or required methodo- logies and procedures). Included are discuss
40、ion of and justification for alterna- 4.6 Modeling and ADP. In the early phases of the acquisition, the cost element structure is likely to be relatively simple. efficiently by hand than by computer, However, product characteristics and quantities are constantly changing, and usually many estimates
41、are needed based Cost estimating could be done more Provided by IHSNot for ResaleNo reproduction or networking permitted without license from IHS-,-,-_ -_ _ -_ .-_-_- MIL-HDBK-259 MI 0049939 4 rn MIL-HDBK-259 (NAVY) 1 April 1983 on different assumptions. quickly and efficiently with the added advant
42、age that differences in estimated costs are not caused by changes in methodology or by errors in computation. Developing a computerized model flexible enough to meet the growing needs of the program or project throughout the acquisition effort can consume significant resources. Consequently, a LCC m
43、anagement effort should include a thorough search for an existing LCC model which has been used successfully in the past and which can satisfy the present LCC analysis requirements. development of computerized LCC models in government and industry over the last two decades, developing new computer p
44、rograms without checking existing ones first would be imprudent, “Costing Methods and Models for Acquisition Planning, Budgeting and Contracting“ by the Office of Management and Budget (OMB), Other sources include the Defense Logistics Studies Information Exchange (U.S. Army Logistics Management Cen
45、ter, Fort Lee, Virginia 23801), the Defense Technical Information Center, and the Federal Software Exchange Center. In addition, NAVMAT has prepared and made available the “Life Cycle Cost Guide for Major Weapon Systems“ (AD A0822731 and the “Life Cycle Cost Guide for Equipment Analysis“ (AD A083845
46、) along with a computerized LCC methodology (AD A115621) and users guide (AD A115622) which can be used in most applications of this handbook. supports LCC models as do the Naval Electronics Systems Command (NAVELEX, code ELEX 82B) and the Naval Air Systems Command (NAVAIR, code AIR 524). Chief of N
47、aval Operations (CNO, code OP 112C) has developed and made available the HARDMAN LCC model. A computerized cost model can produce these estimates Given the extensive A list of successful cost models can be found in NAVMAT (MAT 01F4) maintains and More information on LCC models can be found in paragr
48、aph 5.6.2. 4.7 Cost control techniques. support the cost control function. The most important task of LCC management is to Previous paragraphs discussed in-house aspects of controlling costs. however, are responsible for the largest part of the acquisition cost, and the acquisition manager has a cor
49、responding need to control them, following three techniques are available for this purpose: DTC, reliability improvement warranty (RIW), and LCC procurement, DTC (also called design-to-life- cycle-cost) is a management technique for controlling LCC via the early quantifi- cation and tracking of cost objectives and goals during the development process. Compared to life cycle costing as an estimating technique, DTC i
