This document provides guidelines for preparing, documenting, and presenting operating and support (O&S) cost estimates to the Office of the Secretary of Defense (OSD) Cost Analysis Improvement Group (CAIG). It discusses the requirements for O&S cost estimates, provides instructions for developing such estimates, and presents standard cost element structures and definitions for specific categories of weapon systems. Documentation and presentation requirements also are provided to assist in preparing for CAIG reviews.
The primary objective of the guidelines is to achieve consistent, well-documented O&S cost estimates that can be replicated and verified by an independent party. This document supersedes previously published O&S guides and is the authoritative source of information on preparing O&S cost estimates for CAIG review.
1.2 AUTHORITY AND REFERENCES
The foundation for the development and review of life-cycle cost estimates within the Defense Acquisition Board (DAB) process is described in the documents listed below. These documents identify the responsibilities of the various participants in the acquisition process, from the Office of the Secretary of Defense to Department of Defense (DoD) field activities. The requirement to prepare O&S estimates is discussed primarily in the context of preparing life-cycle cost estimates. The following paragraphs provide brief summaries of the purpose and scope of the major acquisition-related documents:
DoDD 5000.49, "Defense Acquisition Board," dated September 11, 1989. DoDD 5000.49 implements relevant portions of key DoD acquisition documents and establishes the Defense Acquisition Board as the senior advisory body to the Under Secretary of Defense for Acquisition, with the functions, responsibilities, and authorities necessary to perform its mission.
DoDD 5000.1, "Defense Acquisition," dated February 23, 1991. DoDD 5000.1 establishes a disciplined approach for acquiring systems and defines the acquisition responsibilities of key officials and forums. The actual authority for each position is described in individual DoD directives. DoDD 5000.1 assigns the CAIG responsibility for providing independent cost estimates in support of the DAB review process.
DoDI 5000.2, "Defense Acquisition Management Policies and Procedures," dated February 23, 1991. DoDI 5000.2 implements DoDD 5000.1 by establishing a consolidated set of policies and procedures that can be implemented down to the program manager and field operating level without supplementation.
DoD 5000.2-M, "Defense Acquisition Management Documentation and Reports," dated February 23, 1991. DoDD 5000.2-M establishes procedures and formats for various acquisition-related reports, such as milestone documentations, periodic in-phase status reports, and statutory certifications. The manual is intended for direct implementation by the DoD components without supplementation.
DoDD 5000.4, "OSD Cost Analysis Improvement Group" (revised edition forthcoming). DoDD 5000.4 establishes the CAIG and describes its responsibilities as the cost-estimating advisor to the DAB. It also establishes requirements for preparing and presenting estimates to the CAIG.
These directives and instructions make the CAIG responsible for establishing criteria, standards, procedures, and documentation requirements for cost estimates. After reviewing a cost estimate prepared by a DoD component, the CAIG must submit a report to the DAB presenting its findings.
This guide focuses primarily on the preparation of O&S cost estimates for major weapon systems that will be reviewed by the CAIG prior to a DAB milestone review or DAB committee program review. The guide also applies to CAIG reviews of cost estimates of systems for which milestone review authority has been delegated to a military department. (Note 1) The guide also may be used for any other O&S cost analyses performed during or after the acquisition process (including cost-effectiveness, trade-off, and design-to-cost impact analyses), whether or not a DAB review is scheduled.
This document explains how to construct a complete O&S estimate. A complete estimate of O&S costs will typically include the costs of personnel, consumables, goods and services, and sustaining support and investments associated with the peacetime operation of a weapon system. The reporting requirements and procedures outlined in subsequent chapters are designed to allow the analyst to choose models and cost-estimating techniques that are appropriate for the particular acquisition milestone and phase at which a system is being reviewed.
Note: 1. All acquisition programs are placed in acquisition categories based on specific selection criteria. The acquisition category to which a program is assigned determines the milestone decision authority and reporting requirements for that program. DoDI 5000.2 identifies the selection criteria employed and describes each acquisition category.
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