I n t e g r i t y - S e r v i c e - E x c e l l e n c e

Headquarters U.S. Air Force

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Air Force Cost Analysis in 2011

Mr. Rich HartleyDeputy Assistant Secretary of the Air Force

(Cost and Economics)

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

Setting the Stage

“Nobody can afford wishful thinking anymore. We certainly learned that with the F-35. We will pinpoint what we have to have and it will neither be lowball nor wishful thinking.”

-- Gen Norton Schwartz, Air Force Chief of Staff Aviation Week & Space Technology, May 17, 2010

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Overview

WSARA Cost in the AF POM DoD efficiency agenda Should cost, Red Team Reviews, etc Special studies, BCAs, etc. Training, education and development Closing thoughts

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WSARA

CAPE Influence “With concurrence of the DCAPE” Full funding consistent with SCP Documentation Annual report on cost

MDAP issue team MS-A Certifications

CSDR VAMOSC MAIS

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Cost in AF POM

AFPD 65-5 Annual A8 call Portfolio cost risk analysis Decision support Cost consciousness culture change MDAP issue team Involved

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Cost in AF POM(cont)

FY11 APOM: 20 Programs, 34% of AF Investment FY12 POM: 48 Programs, 42% of AF Investment Successes:

Increased Pgm Office/AFCAA collaboration stronger estimates Pre-briefed PEOs Excursions with valid cost data Cost conscious decisions risk reduced MDAP issue team!

Lessons Learned: NACAs earlier to influence MAJCOM POMs Increase PEM involvement Acceptance maturing Expand SIPRNET access

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NACA 0 - 5% > PB NACA 6 – 24% > PB NACA > 25% of PB

G Y R

G

Portfolio 2 Sub-total (TY$M) FY12 FY13 FY14 FY15 FY16 Subtotal

12-16 Estimates 815.8 953.2 974.6 984.2 872.5 4,600.2 POM Funding 652.9 656.0 680.6 681.4 631.1 3,302.1 Funding Estimate Delta (162.9) (297.1) (293.9) (302.8) (241.4) (1,298.1)

R

Portfolio 3 Sub-total (TY$M) FY12 FY13 FY14 FY15 FY16 Subtotal 12 -16

Estimates 1,274.4 1,281.5 1,021.6 1,159.0 1,787.5 6,524.0 POM Funding 1,244.1 1,216.8 1,051.3 1,215.0 1,182.7 5,910.0 Funding Estimate Delta (30.3) (64.7) 29.7 56.0 (604.8) (614.0)

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Cost in AF POMPortfolio Cost Risk Assessment Example

Portfolio 1 Sub-total (TY$M) FY12 FY13 FY14 FY15 FY16 Subtotal

12-16 Estimates 93.7 103.4 84.0 91.7 96.8 469.6 POM Funding 117.2 120.0 142.8 126.6 0.0 506.6 Funding Estimate Delta 23.5 16.6 58.8 34.9 (96.8) 37.0

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Efficiencies

Carter memo Acquisition efficiencies Affordability

SECDEF consideration of costs memo FY2011 NDAA

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Dr. Carter Memo on Better Buying Power

USD/AT&L Memo 3 Nov 2010 Target affordability and

controlling cost growth Incentivize productivity &

innovation in industry Promote real competition Improve tradecraft in

services acquisition Reduce non-productive

processes and bureaucracy

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Sec 811. Cost Estimates for Program Baselines and Contract Negotiations for MDAPs and MAIS Programs … estimates developed for baseline descriptions … are not to be used

for the purpose of contract negotiations … estimates [for negotiations and obligations] …based on

governments reasonable expectation of successful contractor performance

…the PM and Contracting Officer for each MDAP/MAIS shall ensure that cost analyses and targets developed for the purpose of contract negotiations and the obligations of funds be carried out …[in] a high degree of confidence that the program can be completed without the need for significant adjustment to program budgets

…funds that are made available for a MDAP/MAIS program IAW a cost estimate …but are excess to a cost analysis or target developed …shall remain available for obligation in accordance with the terms of applicable authorizations or appropriations Acts.

FY 2011 NDAASec 811

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Should Cost, Red Team Reviews, Etc.

USD (AT&L) - PM owns should cost SAF/AQ – independent “special study” should costs Completed

EELV Global Hawk F-22 Mod JAT F-135 JAT

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Potential Future B-2 DMS SDB II SBIRS AEHF GPS-MGUE GPS-OCX

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Special Studies & BCAs

SECAFs TFE/TFI Civilian PCS Military end strength FM Center of Expertise (COE)

218 projects greater than $3.4B over the FYDP

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Other

Cost estimate confidence level Joint Space Cost Council / Cost IPTs Revitalize program control Earned Value Management Updating AFIs

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Training, Education and Development

BUS-CE – curriculum / certification NPS cost masters – distance program Developing AFIT professional development courses

Supplement DAU – more robust AT&L Key Leadership Positions (KLPs) AFIT Masters---civilians?

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You Can Help

Identify and advocate “real” requirements for the job

Consider past performance, AFPD 65-5 and WSARA

Build relationships with engineering, contracting, and PMA&E

Help build AFIs, handbooks, and training material

Contribute to data collection and methods development

Get reacquainted with documentation

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Closing Thoughts

AF FM has fiduciary responsibility to be honest broker Maintain your objectivity

Cost estimators, don’t forget Skills are more valuable than ever to the Air Force Estimating is forecasting—leverage past knowledge for

future predictors Challenge technical and schedule assumptions—they

drive your product

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ONE TEAM ONE FIGHT

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NDAA 2011 Sec 811SEC. 811. COST ESTIMATES FOR PROGRAM BASELINES AND CONTRACT NEGOTIATIONS FOR MAJOR DEFENSE ACQUISITION AND MAJOR

AUTOMATED INFORMATION SYSTEM PROGRAMS.Section 2334 of title 10, United States Code, is amended—(1) in subsection (d)—(A) in paragraph (1)—(i) by striking ‘‘paragraph (2)’’ and inserting ‘‘paragraph(3)’’; and(ii) by striking ‘‘, the rationale for selecting such confidence level, and, if such confidence level is less than80 percent, the justification for selecting a confidence level of less than 80 percent; and’’ and inserting ‘‘and the rationale for selecting such

confidence level;’’;(B) by redesignating paragraph (2) as paragraph (3); and (C) by inserting after paragraph (1) the following newparagraph (2): ‘‘(2) ensure that such confidence level provides a high degree of confidence that the program can be completed without the need for

significant adjustment to program budgets; and’’;(2) by redesignating subsections (e) and (f) as subsections (f) and (g), respectively; and(3) by inserting after subsection (d) the following new subsection (e):‘‘(e) ESTIMATES FOR PROGRAM BASELINE AND ANALYSES AND TARGETSFOR CONTRACT NEGOTIATION PURPOSES.—(1) The policies, procedures, and guidance issued by the Director of Cost Assessmentand Program Evaluation in accordance with the requirements of subsection (a) shall provide that—‘‘(A) cost estimates developed for baseline descriptions and other program purposes conducted pursuant to subsection(a)(6) are not to be used for the purpose of contract negotiations or the obligation of funds; and‘‘(B) cost analyses and targets developed for the purpose of contract negotiations and the obligation of funds are based onthe Government’s reasonable expectation of successful contractor performance in accordance with the contractor’s proposaland previous experience.‘‘(2) The Program Manager and contracting officer for each major defense acquisition program and major automated information systemprogram shall ensure that cost analyses and targets developed for the purpose of contract negotiations and the obligation of fundsare carried out in accordance with the requirements of paragraph (1) and the policies, procedures, and guidance issued by the Directorof Cost Assessment and Program Evaluation. ‘‘(3) Funds that are made available for a major defense acquisitionprogram or major automated information system program in accordance with a cost estimate conducted pursuant to subsection(a)(6), but are excess to a cost analysis or target developed pursuant to paragraph (2), shall remain available for obligation in accordance with the

terms of applicable authorization and appropriations Acts.‘‘(4) Funds described in paragraph (3)—‘‘(A) may be used— ‘‘(i) to cover any increased program costs identified by a revised cost analysis or target developed pursuant to paragraph (2); ‘‘(ii)

to acquire additional end items in accordance withthe requirements of section 2308 of this title; or‘‘(iii) to cover the cost of risk reduction and process improvements; And ‘‘(B) may be reprogrammed, in accordance with establishedprocedures, only if determined to be excess to program needs on the basis of a cost estimate developed with the concurrenceof the Director of Cost Assessment and Program Evaluation.’’.

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