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CDFM Module 2.2 Budget and Cost Analysis > Module 2.2 Cost and Economic Analysis > Flashcards

Module 2.2 Cost and Economic Analysis Flashcards

1
Q

Three keys processes in the Department of Defense that must work in concert to deliver the capabilities required by the warfighters.

A
  1. The capabilities evaluation process
  2. The acquisition process
  3. The PPBE
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2
Q

The three principal decision-making support systems within DoD. Linking these decision support systems is the DoD National Defense Strategy (NDS)

A
  1. The PPBE
  2. JCIDS
  3. DAS
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3
Q

DoD’s Principal resource management process?

A

PPBE

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4
Q

The JCIDS is based on a series of ____ ____ analyses derived from strategic level guidance, including NSS. NMS, the Joint Vision 2020, and NDS. Rather than focusing on the capabilities individual weapon systems in isolation, the analysis assess capabilities in the context of integrated architectures of multiple _______ systems.

A

Top-down, Interoperable

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5
Q

JCIDS analysis process identifies ____ ____ or shortcomings, and assesses the ____ associated with these _____.

A

Capability gap; risks; gaps

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6
Q

JCIDS identified capability gaps may be addressed by a combination of ______ and/or ____ ____ solutions ( ___ ___ solutions would be changes to doctrine, organization, training, leadership and education, personnel, and facilities). Recommended _____ solutions, once approved, lead to acquisition programs.

A

Material; Non-material; Material

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7
Q

It is the management process that guides all DoD acquisition program.

A

Defense Acquisition System (DAS)

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8
Q

Provides the Policies and Principles that govern the Defense Acquisition System

A

DoD Directive 5000.01 (The Defense Acquisition System)

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9
Q

Establishes the management framework that implements these policies; it emphasizes innovation and flexibility in the responsibility in the acquisition process and focuses on required outcomes and statutory requirements.

A

DoD Instruction 5000.02 (Operation of the Adaptive Acquisition Framework)

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10
Q

What is the ultimate goal of the DAS?

A

Successfully manage RISK

  • Schedule Risk
  • Cost Risk
  • Performance Risk
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11
Q

DoD Instruction 5000.02 six pathways for the acquisition of needed goods and services:

A
  1. Urgent Capability Acquisition
  2. Middle Tier of Acquisition
  3. Major Capability Acquisition
  4. Software Acquisition
  5. Defense Business Systems, and
  6. Acquisition of Services
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12
Q

What is at the basis of every Defense acquisition program?

A

A validated capability requirement that has been determined to be best satisfied by a material solution rather than a non-material solution

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13
Q

The CJCS with advice of the JROC, will assess and validate Joint Military requirements for these acquisition programs:

A

Major Acquisition Programs (MDAPs)

Major Automatic Information Systems (MAIS)

JROC validation authority is delegated in accordance with the JCIDS process.

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14
Q

As part of the JCIDS early analysis process, representatives from the DoD communities set forth in an _____ _____ Document the broad, time-phased operational goals, and a description of the required capabilities to address a specific gap.

A

Initial Capabilities Document (ICD)

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15
Q

Assuming a material solution is considered the most appropriate method to resolve the identified gap, the next step is to start action on an acquisition program as that material solution. This is when the Defense _____ _____ System becomes involved.

A

Defense Acquisition Management System

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16
Q

The acquisition pathway that usually translates to a weapons system

A

The Major Capability Acquisition Pathway

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17
Q

This acquisition pathway translates to an information technology system

A

The Software Acquisition Pathway

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18
Q

The purpose of this phase is to conduct the analysis and other activities needed to choose the concept for the product that will be acquired, to begin translating validated capability gaps into system-specific requirements including Key Performing Parameters (KPPs) and Key System Attributes (KSAs) and to conduct planning to support a decision on the acquisition strategy for the product.

A

Material Solution Analysis (MSA) Phase

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19
Q

Analysis of Alternatives (AOA) solutions, key trades among costs, schedule, performance, affordability analysis, risk analysis, and planning for risk mitigation are key activities in this phase.

A

Material Solution Analysis (MSA) Phase

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20
Q

Favorable _____ decision approves program entry into the next phase (Technology Maturation & Risk Reduction) and the release of the final Request For Proposals (RFPs) for the activities to be conducted in that next phase.

A

Milestone A

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21
Q

True or False

Favorable Milestone A (MS A) decision equates program initiation for a program

A

False

It just approves the program into the next phase (Technology Maturation & Risk Reduction, TMRR).

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22
Q

Entry into this phase occurs with a successful MS A decision review.

A

Technology Maturation & Risk Reduction (TMRR)

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23
Q

The purpose of this phase is to reduce technology, engineering, integration, and life cycle cost risk to the point that a decision to contract for the work effort in the next phase (Engineering and Manufacturing Development (EMD) can be made with confidence.

A

Technology Maturation & Risk Reduction (TMRR)

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24
Q

Critical decision point in the life cycle of the acquisition program

A

Development RFP Release Decision Point, which is to ensure, prior to the release of the solicitation for EMD, that an executable and affordable program has been planned using a sound business and technical approach.

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25
Q

A favorable Milestone ___ decision approves program entry into the next phase (Engineering and Maturation Development (EMD)) and for the responsible Component to award EMD Contract(s).

A

Milestone B

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26
Q

It is the formal initiation of an acquisition program with the MDA’s approval of the Acquisition Program Baseline (APB) and it also commits the required investment resources to the program.

A

Milestone B

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27
Q

It is the agreement between the MDA and the Program Manager and his/her acquisition chain of command that will be used for tracking and reporting for the life of the program or program increment.

A

Acquisition Program Baseline (APB)

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28
Q

At this Milestone, the MDA will finalize the Low Rate Initial Production (LRIP) quantity or scope of limited deployment, as applicable.

A

Milestone B

Following the Milestone B review, MDA decisions will be documented in an Acquisition Decision Memorandum.

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29
Q

Following the Milestone B review, where will MDA decisions be documented?

A

In an Acquisition Decision Memorandum (ADM).

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30
Q

Entry into this phase occurs with successful Milestone B decision review.

A

Engineering and Maturation Development (EMD) Phase

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31
Q

The purpose of this phase is to develop, build, and test a product to verify that all operational and derived requirements have been met, and support production or deployment decisions.

A

EMD phase

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32
Q

During anytime in this phase, the MDA may authorize advanced procurement of long lead production items, subject to the availability of appropriations.

A

EMD phase

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33
Q

Development Testing and Evaluation (DT&E) is conducted during this phase

A

EMD phase

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34
Q

Early operational assessments conducted by the Component operational test organization will normally occur during this phase

A

EMD

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35
Q

This Milestone and the Limited Deployment Decision are the points at which a program or increment of capability is reviewed for entrance into the Production and Deployment Phase of Limited Production

A

Milestone C

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36
Q

MDA decisions at Milestone C and Limited Deployment will be documented in —-

A

An Acquisition Decision Memorandum

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37
Q

Entry into this phase occurs with a successful Milestone C decision review.

A

Production and Deployment (P&D) Phase

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38
Q

The purpose of this phase is to achieve an operational capability that satisfies mission needs.

A

Production and Deployment (P&D) Phase

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39
Q

Operational Test and Evaluation (OT&E) is conducted during this phase; OT&E is intended to determine the effectiveness and suitability of the system.

A

Production and Deployment (P&D) Phase

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40
Q

The MDA makes the decision to commit DoD to production at milestone and documents the decision in an ADM.

A

Milestone C

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41
Q

A successful Milestone C review enables the program to enter into LRIP; does it allow the program to go into full rate production that delivers the fully funded quantity of systems and supporting material and services for the warfighter user?

A

No - Only after a later successful Full Rate Production Decision Review (FRPDR)

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42
Q

During this acquisition phase, the program also achieves its initial Operational Capability (IOC), which is a specific date by which a specific operational capability provided by the acquisition system is attained

A

P&D phase

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43
Q

This Milestone specifically authorizes entry into LRIP (for MDAPs and Major Systems), into production or procurement (for non-major systems that do not require LRIP) or into limited deployment in support of operational testing for MAIS programs or software-intensive systems with no production components

A

Milestone C

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44
Q

Although this decision point is technically reached during the Production and Deployment (P&D) phase and is not a Milestone, it is an extremely important decision point.

A

Full-Rate Production Decision or Full Deployment Decision

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45
Q

What is the MDA responsibility for the Full-Rate Decision/Full Deployment Decision?

A

Conduct a review to assess the results of initial OT&E, initial manufacturing, and limited deployment, and determine whether or not the program has demonstrated successful control of the manufacturing process, acceptable performance and reliability, and establishment of adequate sustainment and support systems

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46
Q

The purpose of this phase is to execute the product support strategy, satisfy materiel readiness and operational support performance requirement, and sustain the system over its life cycle (to include disposal)

A

Operations and Support (O&S) Phase

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47
Q

This phase has two major efforts: Sustainment and Disposal

A

O&S phase

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48
Q

The Life Cycle Support Plan (LCSP), prepared by the Program Manager and approved by the MDA, is the basis for this phase. For most systems, except for Space programs, the vast majority of its life cycle costs are incurred during this phase because of the normal life expectancy of the system and the high costs associated with Military manpower and replenishment spares and other maintenance requirements

A

O&S phase

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49
Q

During this phase, the program achieves its Fully Operational Capability (FOC), which occurs when the total quantity of operational items is deployed to the warfighter user.

A

O&S phase

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50
Q

Funding Type used during Materiel Solution Analysis Phase

A

RDT&E and O&M

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51
Q

Funding Type used during Technology Maturation & Risk Reduction phase

A

RDT&E

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52
Q

Funding Type used during Engineering & Manufacturing Development phase

A

RDT&E and Procurement

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53
Q

Funding Type used during Production and Deployment

A

Procurement and Milcon

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54
Q

Funding Type used during Operation and Support phase

A

O&M and Milpers

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55
Q

This path starts with a decision at Milestone _____ to authorize entry into the Technology Development Phase. There is only one Milestone ____ for an acquisition program. Normally, successful passage of Milestone _____ doesn’t equal initiation for a new program.

A

Milestone A

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56
Q

The purpose of Milestone ___ is to authorize entry into the Engineering and Manufacturing Development phase. Programs that enter the acquisition process at this milestone are required to have a system architecture and an operational architecture for their relevant mission area. This milestone is usually the point at which program initiation occurs. When Milestone _____ occurs, the military department or agency is required to have adequate funds in the FYDP to finance the acquisition program during this period.

A

Milestone B

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57
Q

At Milestone ____, the appropriate authority approves the acquisition strategy, an updated development acquisition program baseline, the exit criteria for low rate initial production or limited deployment, and all decisions are documented in the Acquisition Decision Memorandum (ADM). A favorable Milestone ___ decision authorizes the program manager to commence low rate initial production (LRIP) or limited deployment.

A

Milestone C

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58
Q

Where can DoD acquisition policy be found?

A

DoD Directive 5000.01 - The Defense Acquisition System

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59
Q

DoD Directive’s five (5) Overarching policies include?

A

Flexibility - No one best way to structure a program

Responsiveness - early integration, requirements time phased, evolutionary strategies

Innovation - Initiative/ practices that reduce cycle time an cost

Discipline - program goal identified by cost, schedule, performance parameters

Streamline and Effective Management - Responsibility, credibility

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60
Q

Defense Acquisition Executive (DAE)

A

USD(A&S), also is the OSD level Milestone Decision Authority (MDA). He can delegate this authority to another OSD official as he sees fit.

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61
Q

Two components have been given specific acquisition management responsibilities

A

The U.S. Special Operations Command (SOCOM)

Defense Logistics Agency

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62
Q

Executes the research and engineering responsibilities contained in DoDD 5134.01

A

USD(R&E)

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63
Q

He is the Chief Technology Officer (CTO) of the DoD, advising the Secretary on all technology related matters

A

USD(R&E)

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64
Q

He assists as a technical advisor in the preparation of MDAP analysis of alternatives study guidance; confirms that a material solution that addresses the need or capability gap for MDAP is technologically feasible and achievable.

A

USD(R&E)

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65
Q

He approves and conducts independent technical risk assessments for ACAT ID programs; maintains authority over early development prototyping policy, and approves the development, testing, and evaluation in the Test and Evaluation Master Plan.

A

USD(R&E)

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66
Q

Major Defense Acquisition Program (MDAP)

A

ACAT I

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67
Q

Estimated by the USD(A&S) to require total expenditure of:

RDT&E of more than $480M or

Procurement of more than $2.79B

A

ACAT I

ACAT ID, when MDA is DoD level

ACAT IC, when MDA is Component level

It is designated by USD(A&S) because of “special interest”

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68
Q

The ____ is the single official within DoD component who is responsible for all acquisition functions within that component. This includes Service Acquisition Executives (SAEs) for the military departments and acquisition executives in other specified DoD components

A

Component Acquisition Executive (CAE)

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69
Q

USD(A&S) estimates this acquisition category costs to be:

Annual total costs > $40M

Total Program cost > $165M

Total Life Cycle cost > $520M

A

ACAT IA, a Major Automated Information System (MAIS) program.

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70
Q

ACAT IAM

A

MAIS program when MDA is at a DoD level, where “M” indicates “Defense”

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71
Q

ACAT IAC

A

MAIS program when MDA is at a Component level, where “C” indicates “Component”

72
Q

Governs the requirements and acquisition process for business systems across the DoD

A

DoDI 5000.75

In lieu of DoDI 5000.02 for all business systems that are not Major Defense Acquisition Programs.

73
Q

To comply with legal requirements, DoDI _____ requires that every acquisition program establish an ___ ____ ___ to document the cost, schedule, and performance objectives and thresholds of that program beginning at program initiation.

A

DoDI 5000.02

Acquisition Program Baseline

74
Q

The APB should contain only the most important ___, ___, and ___ parameters

A

Cost, schedule, and performance

Program goals consist of “objective” values and “threshold” value for each parameter of the program. Program “objectives” represent specific parameters (capabilities) that the warfighter user desires from the acquisition program. Program “thresholds” represent the minimum parameters (capabilities) that the warfighter user is willing to accept from the acquisition program. The most important parameters are those that, if the thresholds were not met, would cause the MDA to require a reevaluation of alternative concepts for design approaches.

75
Q

Primary purpose of the Analysis of Alternatives (AoA)

A

To assess the potential materiel solutions to satisfy the capability need documented in the approved Initial Capabilities Document (ICD)

76
Q

It is an analytical comparison of the operational effectiveness, suitability, and life cycle cost of alternatives that satisfy established capability needs stated in the approved ICD. A sufficient ___ ___ ___ ensures the best, most affordable alternative material solution is selected from among the potential solutions. While not a full-up life cycle cost estimate of each alternative, the ___ ___ ___ provides sufficient information about the cost of the various alternatives to determine the one most affordable.

A

The Analysis of Alternatives (AoA)

77
Q

DoDI _____ requires an AoA for ACAT I and ACAT IA acquisition programs at major milestone decisions points, at the full-rate production decision point or equivalent and at such other times in the acquisition cycle that may be required by the Milestone Decision Authority (MDA)

A

DoDI 5000.02

78
Q

Total System Approach

A

Includes all the elements of the system from cradle to grave

79
Q

Weapon system (hardware and software)

operators and Maintainers

Operational Effectiveness and Suitability

Deployment/Fielding

Interoperability

Training and Training Devices

Environmental Impact

A

Total System Approach

80
Q

The total cost to the Government for a system over its entire life

A

Life Cycle Cost

81
Q

Life cycle cost

A

Total cost to the Government for a system over its entire life

82
Q

Three major ways to look at Life Cycle Cost estimates

A
  1. Work Breakdown category
  2. Appropriation Category
  3. Cost Category (R&D, Investment, Operations & Support, Disposal)
83
Q

It can be defines as the total cost to the GOV of a program over its entire life, including cost for R&D, testing, production, facilities, operations, maintenance, personnel, environmental compliance, and disposal.

A

LCC

84
Q

Life cycle cost estimate is prepared as a……

A

Constant year dollars, which are tied to a specific Base fiscal year (year cost estimate was prepared)

85
Q

Constant year dollars do not reflect the effects of _____ during the life of the acquisition program.

A

Inflation

86
Q

Cost estimate used for programming and budgeting purposes

A

Then-year or current year dollars

87
Q

Cost estimate that reflect the effects of inflation

A

Then-year or current year dollars

88
Q

The three (3) major ways of grouping and viewing program life cycle cost estimates:

A

Appropriation category

Work Breakdown Structure

Life Cycle Cost categories

89
Q

The five appropriation categories

A

O&M

MILPERS

RDT&E

Procurement

MILCON

90
Q

Method of grouping LCC that is of greatest interest to the business financial manager

A

Appropriation Category

91
Q

Method of grouping LCC that is of greatest interest to the program manager and chief engineer of the acquisition program

A

Work Breakdown Structure (WBS)

92
Q

It provides a framework for a program and technical planning, cost estimating, resource allocations, performance measurements, and status reporting.

A

The Work Breakdown Structure (WBS)

93
Q

This method of grouping LCC should define the total system to be developed or produced; display the total system as a product-oriented family tree composed of hardware, software, services, data, and facilities; and relate the elements of work to each other and to the end product. In accordance to MIL-STD-881D

A

The Work Breakdown Structure (WBS)

94
Q

Acquisition program tailored in accordance to the guidance in MIL-STD-881D

A

Work Breakdown Structure (WBS)

95
Q

This method of grouping LCC is of the greatest interest to the Cost Analyst of the Acquisition program and the various cost analysts at the Services and DoD level.

A

Life Cycle Cost Categories

Per DoD 5000.4-M, Cost Analysis Guidance and Procedures

96
Q

This LCC Category contains cost of all ___ and ___, from program initiation through the Full Rate Production decision

A

Research and Development (R&D)

97
Q

This LCC Category contains all costs of the ____ phase, including total cost of procuring the prime equipment; related support equipment, initial training, initial and war reserve spares, pre-planned product improvements, and military constructions

A

Investment

98
Q

This LCC Category contains cost of ___ and ___ the fielding system, including all direct and indirect costs incurred in using the system (personnel, maintenance) and sustaining investment. The bulk of the life cycle occur in this category.

A

Operations and Support (O&S)

99
Q

This LCC Category contains cost to ___ of the system after its useful life. This includes demilitarization, detoxification, long-term waste storage, environment restoration, and related costs.

A

Disposal

100
Q

Cost Analysis Requirements Description (CARD)

A

Required for all ACAT I and ACAT IA programs

Updated for all Milestone and program reviews

Preparation is responsibility of Program Manager

Identifies detailed requirements of acquisition system

Forms basis for preparation of costs estimates

101
Q

Required for all ACAT I and ACAT IA programs

Updated for all Milestone and program reviews

Preparation is responsibility of Program Manager

Identifies detailed requirements of acquisition system

Forms basis for preparation of costs estimates

A

Cost Analysis Requirements Description (CARD)

102
Q

The foundation of a sound and credible cost estimate is a well-defined program. The D, CAPE requires the use of the ___ ___ ___ ___ and provides guidance on the content of the ____ in DoD 5000.4-M

A

Cost Analysis Requirements Description; CARD

103
Q

Prepares the CARD

A

The Program Manager

104
Q

Approves the CARD

A

The Program Executive Officer (PEO)

105
Q

The D,CAPE and the organization preparing the DoD component cost estimate (CCE) must receive a draft CARD ___ calendar days, and the final CARD ___ calendar days, prior to a planned Overarching Integrated Product Team (OIPT) or equivalent staff coordination body review or DoD Component review, unless D,CAPE agrees to other dates

A

180 days; 45 days

106
Q

High visibility programs Congress is extremely interested in:

A

MDAPs, known as ACAT I

Congress is interested in potential cost increase of MDAPs and requires DoD to submit a report when an MDAP experience a cost growth in two different types of “average unit” costs beyond specific thresholds, known as Nunn-McCurdy Unit Cost Breaches.

107
Q

Congress is interested in potential cost increase of MDAPs and requires DoD to submit a report when an MDAP experience a cost growth in two different types of “average unit” costs beyond specific thresholds, known as Nunn-McCurdy Unit Cost Breaches. These are:

A

Average Procurement Unit Cost (APUC)

Program Acquisition Unit Cost (PAUC)

108
Q

The amount found by dividing the total of Procurement funds programmed to be available for the obligation by the number of fully-configured end items to be procured with those procurement funds.

A

Average Procurement Unit Cost (APUC)

109
Q

Average Procurement Unit Cost:

A

Procurement funds programmed to be available for the obligation

_______________________________________________

Number of fully-configured end items to be procured

110
Q

The amount found by dividing the total cost for development and procurement of, and system-specific military construction for, the acquisition program by the number of fully configured end items to be produced for the acquisition program

A

The Program acquisition unit cost

111
Q

The Program Acquisition Cost (PAUC)

A

Total cost for development and procurement of, and system-specific military construction for,

____________________________________________________

The number of fully configured end items to be produced

112
Q

Fully-configured end items

A

The final combination of end products, components parts, and/or materials which is fully ready for its intended operational use.

113
Q

Includes all RDT&E contract and in-house activities needed to design and test the system

A

Development Cost

For RDT&E only

Prime mission and support Equipment

R&D Cost Category

114
Q

Refers to the cost of procuring prime mission equipment “Rollaway or Sail-away”, depending on system.

A

Flyaway Cost

Procurement Appropriation

Prime Mission Equipment

Investment Cost Category

115
Q

Includes costs for Prime Mission and Support Equipment, along with warranties, engineering changes, and the first destination transport costs; costs are procurement counterpart of development costs.

A

Weapon System Cost

Procurement Appropriation Only

Prime Mission and Support Equipment

Investment Cost Category

116
Q

Includes all Weapon System Costs, plus initial spares and repair parts. Used to compute APUC

A

Procurement Cost

Procurement Appropriation Only

All weapon System Elements plus initial Spares/Repair Parts

Investment Cost Category

117
Q

Refers to the complete cost off a read-to-operate system, including Development Costs, Procurement Costs, and Facilities Costs. Used to compute PAUC.

A

Program Acquisition cost

RDT&E, Procurement, and MILCON Appropriations

Prime Mission, Support Equipment, Initial Spares/Repair Parts

R&D and Investment Cost Category

118
Q

All costs associated with operating, modifying, maintaining, and supporting a system in the DoD inventory, including all direct and indirect costs.

A

Operating and Support Cost

O&M and Military Personnel Appropriations

Not typically used

Operating and Support

119
Q

The cost to the Government of a program over its full useful life

A

Life Cycle Cost (LCC)

All Appropriations Category

Includes WBS Elements

All Cost Categories (including disposal)

120
Q

The three (3) basic types of cost estimates for ACAT I acquisition programs:

A
  1. Program Office Estimate (POE): done at the prog. office or by contractor firm
  2. Component Cost Estimate (CCE): done at component level
  3. Independent Cost Estimate (ICE): done at OSD level

ACAT II, ACAT III and ACAT IC programs only the first two types are done.

121
Q

A product oriented family tree composed of hardware, software, services, data and facilities that displays and defines the products to be developed and/or produced.

A

A Work Breakdown Structure

122
Q

In an area of shrinking defense budgets, DoD has adopted the ____ philosophy of treating cost a fixed cost, allowing performance and schedule to vary somewhat in an attempt to keep weapon systems affordable.

A

Cost As an Independent Variable (CAIV)

123
Q

This Life cycle cost recognizes the following concepts:

  • The best time to reduce cost is early in the process
  • Stakeholders must be involves in the process
  • Cost trade-off must be addressed early in the acquisition process
A

CAIV

124
Q

Steps in this LCC process include:

  • Set realistic but aggressive cost objectives early in the acquisition program.
  • Adequately manage risks
  • Track progress using metrics
  • Motivate GOV and industry managers to achieve program objectives.
  • Incorporate additional incentives to reduce operations and support costs for fielded systems.
A

CAIV

125
Q

Purpose of cost estimate

A

To make programmatic decisions as well as to form the basis of a budget request. Funding policies are applied to the estimate to create an appropriate budget request and ensure funding is not requested earlier than necessary to accomplish the tasks.

126
Q

To make programmatic decisions as well as to form the basis of a budget request. Funding policies are applied to the estimate to create an appropriate budget request and ensure funding is not requested earlier than necessary to accomplish the tasks.

A

Purpose of a cost estimate

127
Q

Cost estimate approach based on direct comparison with historical information of one similar existing activity, system, or component. This technique subjectively compares the new system with one existing for which there is accurate cost and technical data.

A

Analogy Approach

128
Q

This cost estimate compare one similar system. It quick, inexpensive, and easy to change; however, subjective and imprecise.

A

Analogy Approach

129
Q

This cost estimate is based on physical attributes or performance characteristics and their relationships to highly aggregated costs. Sometimes known as statistical method or top-down method. Most beneficial in early stages of the system or project life cycle.

A

Parametric Approach

Strengths: uses CERs, inexpensive; however, a bit subjective and data dependent.

130
Q

Difference between the Analogy approach vs. Parametric approach?

A

Parametric approach reflects data from multiple systems and makes statistical inferences about the Cost Estimating Relationships (CER) between costs and system characteristics.

131
Q

This cost estimate approach is a “bottom-up” method of cost analysis that is the most detailed of all the techniques and the most costly to implement. Estimating by this method requires the analyst to have an extensive knowledge of the system characteristics.

A

Engineering Approach

Strengths: very accurate in later stages of Engineering and Manufacturing Development. “Starting from scratch”, limited subjectivity. However, expensive, time consuming, difficult, mostly performed by contractors.

132
Q

This cost estimate approach uses actual costs contracted for or actually incurred on the same system during an earlier period, which are then projected to future events of a similar nature.

A

Actual Cost Approach

Strength: little subjectivity, very accurate.

133
Q

This cost estimate approach uses a subjective judgement of an experienced individual or group; use if time doesn’t permit a more thorough analysis; document sources of opinion of experts; list attributes of the sources

A

Expert Opinions Approach

Good for “sanity check”

134
Q

This cost estimate approach is a method of narrowing a range of expert opinion to achieve consensus. It involves querying the expert opinions from a group; seeking info and supporting rationale from each expert independently, summarizing results and sending report to each expert; gathering second opinion, then summarize the results. Continuing until there is a consensus.

A

Delphi Technique approach

135
Q

The theory implies that as the quantity of production doubles, the labor-hours per unit expended to produce the product decreases at a fixed rate or constant percentage.

A

Learning Curve theory

The learning curve computation does not take into consideration the cost for materials.

136
Q

There are two types of calculations pertinent to the use of learning curves. Type One:

Given the time required to produce a specific production unit and a learning curve rate, determine the labor time (or cost) to produce the “doubled” production unit from the previously given production unit.

Given time requirement for unit 1 is 300 hours and learning curve is 90%, determine hours required for unit 2 and 4?

A

⇒ Unit 1 (300 hours x 90% or (.90)) = 270 hours for Unit 2

⇒ Unit 2 (270 hours x 90% or (.90)) = 243 hours for Unit 4

137
Q

There are two types of calculations pertinent to the use of learning curves. Type two:

Given the production times of the following units, determine the learning curve rate.

  • Unit 2 (250.0 hours)
  • Unit 4 (237.5 hours)_______ Learning curve rate
  • Unit 8 (——– hours)_______ Learning curve rate
A
  • Unit 4 (237.5 hours)___ 95% ____ Learning curve rate

237.5 hours /250 hours = 95%

  • Unit 8 (225.6 hours)____95%___ Learning curve rate

95% * 237.5 = 225.6 hours

138
Q

Given the below information, determine the unit cost (expressed in labor hours) of the eighth and sixteenth item to be manufactured. Assume a 90% learning curve.

Unit Number Labor hours

1 190

2 171

4 153.9

8 ?

16 ?

A
  • Unit 8 (153.9 hours) * 90% = 138.5
  • Unit 16 (138.51 hours) * 90% = 124.7
139
Q

Given the below information, determine the unit cost (expressed as a percentage). Note that the learning curve percentage remains constant from one unit number to its “doubled” unit.

Unit Number Labor hours

1 700

2 595

4 505.8

8 429.9

16 365.5

A

Unit Number Labor hours Learning Curve

1 700 .85 or 85%

2 595 .85 or 85%

4 505.8 .85 or 85%

8 429.9 .85 or 85%

16 365.5 .85 or 85%

140
Q

Flyaway Cost

A

Procurement Prime Mission Equipment

141
Q

Weapon System Cost

A

Procurement Prime Mission Equipment

Procurement Support Items

142
Q

Procurement Cost

A

Procurement Prime Mission Equipment

Procurement Support Items

Procurement Initial Spares

Or Flyaway + Weapon System Cost + Procurement Initial Spares

143
Q

Development Cost

A

RDT&E

144
Q

Program Acquisition Cost

A

Development cost

Flyaway cost

Weapon System cost

Procurement cost

MILCON Facilities

145
Q

Operations & Support Cost

A

O&M

MILPERS
Disposal (O&M or other)

146
Q

Life Cycle Cost

A
  1. Development Cost (RDT&E)
  2. Flyaway Cost (Proc. Prime Mission Equipment)
  3. Weapon System Cost (Proc. Support Items)
  4. Procurement Cost (Flyaway, Weapon System, Proc. Initial Spares)
  5. Program Acquisition Cost (Development, Proc. Cost, MILCON)
  6. Operations &Support (O&M, MILPERS, Disposal Cost)
147
Q

Given the data provided, calculate the following costs: Development, Flyaway, Weapon System, Procurement, Program acquisition, Operation support, and Life cycle cost.

Total RDT&E $400 Million

Prime mission equipment procurement $600 Million

Support items procurement $ 50 Million

Initial spares procurement $ 50 Million

MILCON $ 100 Million

O&M $ 740 Million

MILPER $ 460 Million

A

Development $400 M

Flyaway $600 M

Weapon System $650 M

Procurement $700 M

Program acquisition $1,200 M

Operation & support $1,200 M

Life cycle cost $2,400 M

148
Q

Cost Savings

Cost Avoidance

Productivity Improvement

A

Quantifiable Benefits

149
Q

Quantifiable Benefits

A

Cost Savings

Cost Avoidance

Productivity Improvement

150
Q

Results in the actual reduction of an approved program if the benefit occurs during the POM period

A

Cost Savings

151
Q

Cost Savings

A

Results in the actual reduction of an approved program if the benefit occurs during the POM period

152
Q

A reduction or elimination of some future resource requirement. If the status quo requires the purchase of certain hardware, which has not been included in an approved program, but implementation of the preferred alternative does not require its purchase and does not degrade current capability.

A

Cost Avoidance

Cost avoidance can accrue at any time during the life cycle

153
Q

Cost Avoidance

A

A reduction or elimination of some future resource requirement. If the status quo requires the purchase of certain hardware, which has not been included in an approved program, but implementation of the preferred alternative does not require its purchase and does not degrade current capability. Cost avoidance can accrue at any time during the life cycle

154
Q

A reduction in future personnel time and effort requirements associated with a function or assigned task has been included in an approved program.

A

Productivity Improvement

Productivity improvements can accrue at any time during the life cycle

155
Q

Productivity Improvement

A

A reduction in future personnel time and effort requirements associated with a function or assigned task has been included in an approved program.

Productivity improvements can accrue at any time during the life cycle

156
Q

The arithmetic average of a distribution and is useful for tracking trends in data. Comparing the mean from the former period of time with the current mean can indicate which way the trend is moving. It is represented by the symbol “x-bar”

A

Mean

157
Q

Mean

A

The arithmetic average of a distribution and is useful for tracking trends in data. Comparing the mean from the former period of time with the current mean can indicate which way the trend is moving. It is represented by the symbol “x-bar”

158
Q

The middle value in a list of numbers after sorting the list in increasing order. If the list has an even number of data points, then the _____ is the average of the two numbers. Unlike the mean, the ____ is less impacted by extreme values “Outliers”.

A

Median

159
Q

Median

A

The middle value in a list of numbers after sorting the list in increasing order. If the list has an even number of data points, then the Median is the average of the middle two numbers. Unlike the mean, the median is less impacted by extreme values “Outliers”.

160
Q

Most frequently used, the ____ provides little information by itself but is useful when there are many data points and when used in conjunction with other descriptive statistics.

A

Mode

161
Q

Mode

A

Most frequently occurring score in a distribution of scores. Provides little information by itself but is useful when there are many data points and when used in conjunction with other descriptive statistics.

162
Q

Often used to describe the limits of a sample of data.

A

Range

To calculate the range, substract the smallest number from the largest number.

163
Q

Range

A

Often used to describe the limits of a sample of data. To calculate the range, substract the smallest number from the largest number.

164
Q

How population is spread around the mean. It is a measure that tells whether values fall close to the mean value or if they are widely dispersed. In economic analysis, it can be used to:

  • quantify cost risk
  • quantify uncertainty
  • quantify relationships between cost drivers and cost objects
A

Standard Deviation (σ - sigma)

165
Q

Standard Deviation (σ - sigma)

A

How population is spread around the mean. It is a measure that tells whether values fall close to the mean value or if they are widely dispersed. In economic analysis, it can be used to:

  • quantify cost risk
  • quantify uncertainty
166
Q

Where values are evenly distributed, they form a ______ or “bell curve”.

A

Normal Distribution Curve

The standard normal distribution has two parameters: the mean and the standard deviation. For a normal distribution,

68% of the observations are within +/- one standard deviation of the mean,

95% are within +/- two standard deviations, and

99.7% are within +- three standard deviations.

167
Q

Ex: given numbers below, calculate the range

1, 2, 2, 4, 5

A

Range is: 5 - 1 = 4

168
Q

Ex: given numbers below, calculate the Mode

2, 4, 5, 1, 2,

A

The most repeated value is 2

it is possible to have several repeated values

169
Q

Ex: given numbers below, calculate the Mean

2, 4, 5, 1, 2,

A

The mean is:

2+4+5+1+2 = 14/5 = 2.8

170
Q

Ex: given numbers below, calculate the Median

3,8,10,3,2,5,7,9,3

A

List numbers in order

2,3,3,3,5,7,8,9,10

The median number is 5

171
Q

Ex: given numbers below, calculate the Median

82,90,73,87,96,83

A

List numbers in order

73,82,83,87,90,96

Add the two middle numbers and divide by 2

83+87 = 170/2 = 85

The median is 85

172
Q

It is an integrated tool that relates technical performance to its associated cost and schedule, measure the work progress in objective terms, and states the value of the work completed in dollars. Requires by DoDI 5000.02

A

Earned Value Management (EVM)

173
Q

_______ is normally used in conjunction with cost plus and fixed-price incentive contracts.

A

EVM

174
Q

Result of comparing Actual Cost of Work Performed (ACWP) to the Budgeted Cost of Work Performed (BCWP). BCWP can be considered the “earned value” of work actually performed.

A

Cost Variance (CV)

BCWP - ACWP = CV

If the ACWP < BCWP _____ Favorable

If the ACWP > BCWP _____ Unfavorable

175
Q

Result of comparing the Budgeted Cost of Work Scheduled (BCWS) to the Budgeted Cost of Work Performed (BCWP)

A

Schedule Variance (SV)

BCWP - BCWS = SV

If the BCWP > BCWS _____ Favorable

If the BCWP < BCWS _____ Unfavorable

CDFM Module 2.2 Budget and Cost Analysis (2 decks)

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