9. Cost Analysis

The tools that support this requirement model costs of generic OOTWs for use in national force structure planning, input to decisions on engaging in an OOTW, and to estimate comparative costs during mission planning. Historical data are required.

Elements include:

• · opportunity cost and
  · comparative costs of different force structures.

The tool requirements are provided by the OOTW analysis tasks that it must support.

· Estimate cost of operation, task # 1.2: Estimate the cost of operations, including both direct and indirect costs.

The MORS OOTW workshop yielded a refinement of Task 1.2, estimate cost of operation.

• Task 1.2.1 Generic OOTW Cost: Estimate the cost of a generic OOTW of a given category, e.g. NEO. The costs are only "incremental costs," i.e., those over and above those in the Congressional Budget. Accuracy of +/- 50%. Who: NCA, OSD, Joint Staff, CINCs, Services.
• Task 1.2.2 Cost Input for Decision to Engage in an OOTW: Estimate the incremental cost of an actual proposed OOTW. The costs will need to be revised as more information becomes available. Accuracy of +/- 50% or better. Needs to consider roles of NGOs, PVOs and allies. An "end-state" and transition plan must be defined for the appropriate costs to be included. Who: NCA, OSD, Joint Staff, CINCs.
• Task 1.2.3 Alternative COA Costs: Estimate the relative costs of alternative COAs for an actual OOTW. The costs required may be full costs, rather than incremental costs. For example, options of contracting for services must be compared against full costs for other options. However, only variable costs need to be computed. Accuracy needs to be +/- 30%. Who: CINCs, components and Services.
• Task 1.2.4 Cost Recovery: Calculate (estimate) the cost of a completed (or partially completed) OOTW for purposes of recovering costs. Legal constraints often allow only incremental costs to be recovered; however, in some instances full costs may be recoverable. Accuracy should be +/- 30% or better. Who: OSD, State Department, Services down to individual units.
• Task 1.2.5 Budgeting for an OOTW: Estimate the cost of a future (or ongoing) OOTW for Congressional Budgeting purposes. For most appropriations, these costs will be full costs. Accuracy of +/- 50%. Who: Service Unit involved.
• Task 1.2.6 OOTW Cumulative OOTW Cost Impacts: Estimate the cumulative costs of participating in OOTWs. The assumption is that the incremental costs of the individual OOTWs do not capture equipment depreciation, readiness losses, increased reserve recruitment and training costs, and perhaps other costs. Accuracy of +/- 50%. Who: Programmers, Services, OSD including Reserves.
• Task 1.2.7 "Actual" Cost Accounting for OOTWs: Account for both incremental and full costs as they occur. Reconcile with earlier estimates. Accuracy of +/- 5% or better. Who: Controller, auditors.

This is a medium-complexity model. The priority is 3; modelability is Yellow (Y); and the data availability is Expensive ($). Do it now.

The table below will be updated as information is posted on the bulletin board for each requirement.

Table 9. Cost Estimation Tools

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