5. O&S DOCUMENTATION REQUIREMENTS

5.1    INTRODUCTION

    This chapter discusses the documentation requirements for O&S cost estimates. The detailed documentation provided with each cost estimate serves as an audit trail for that estimate and as a primary source of the information presented to the CAIG at the summary-level briefing by the program sponsor. The following sections identify a basic cost documentation format and describe the specific types of information that must be provided.

5.2    DOCUMENTATION APPROACH

    This section presents a standard format for documenting O&S estimates reviewed by the CAIG. The stand-alone structure and data elements described represent the minimum information requirements. The guidelines presented for each section are not restrictive and should not limit good judgment in presenting any additional cost details relevant to an estimate. In adapting the basic structure (e.g., in determining the level of indenture or the cost element categories to include), the analyst should ensure that costs are allocated consistently within the CES and that the allocation criteria are explicitly identified in the documentation (to preclude double counting).

    The cost documentation should provide a concise, results-oriented presentation of key points in a manner that directs attention to the effects on O&S costs of the decisions under consideration. Exhibit 5-1 provides a standard framework for structuring this material. The format may be used regardless of the acquisition phase or estimating approach employed. It has been designed to permit a detailed review of the ground rules and assumptions, cost-estimating methods, data sources, and supporting rationale for estimates of O&S costs.

5.3    EXECUTIVE SUMMARY

    This section of the documentation provides a clear and concise summary of the purpose, background, and results of the O&S estimate. It should be brief (no more than four or five pages), yet provide the reviewer sufficient information about the program and its cost to make an informed decision. The executive summary consists of four subsections:

• Purpose/Scope. Identifies the purpose of the estimate, the limitations of the study (if any), and the acquisition phase at which the program is being assessed.
• Background. Provides a brief description of the program, the key assumptions made, the alternatives being reviewed, the reference system used, the operating and support concepts, and relevant technical information.
• Summary. Provides a summary (reduced key cost formats acceptable) of the results of the cost estimate. Presents highlights of the comparisons of the alternative(s) with the reference system. Discusses cost-drivers and high-risk areas that could affect program decisions.

5.4    PROGRAM OVERVIEW

    The program overview describes the purpose of the estimate, the background of the program, the characteristics of the system, and the operating and support philosophy. Comparisons between the proposed system and a reference system should be drawn. Ground rules and assumptions must be identified to prevent misinterpretation of the estimate. The program overview section consists of the following subsections:

• Purpose/Scope. Identifies the purpose of the estimate, any limitations of the study, the acquisition phase at which the program is being reviewed, and the level of detail of the estimate.
• Tasking/Team Composition. Provides a summary of the O&S cost tasking, and identifies the team chief, team members, organization/office symbol, and areas of responsibility.
• Program Summary. Provides background information on the program and a technical summary of the system whose costs are being estimated. Identifies the reference system and compares its characteristics, operating concepts, maintenance and support concepts, mission, and logistics system and subsystem factors with those of the proposed system and any other alternatives being evaluated. Identifies the deployment schedule and describes the initial and follow-on support philosophy (interim contractor support, contractor logistics support, in-house maintenance, etc.) and the proposed training philosophy.

    Much of the information in the program summary can be found in other program documents prepared for DAB or DoD component acquisition reviews. A primary source of much of this information is the Cost Analysis Requirements Document (CARD), prepared by the DoD component responsible for the program. Appendix A lists the major documents prepared for DAB reviews and provides a brief description of each. Supporting documentation should be referenced to provide an audit trail and to ensure that the data used in the estimate are consistent with current program documents.

• Ground Rules and Assumptions. The program documents identify how a system will be operated, maintained, and supported. The ground rules and assumptions are developed from this information. The ground rules should address the O&S period, base year of dollars, type of dollars (constant, then-year, base-year), and inflation indices. Costs to be included or excluded, and elements that differ from the standard CES, should also be identified. The documented ground rules provide the information needed to interpret cost estimates properly. They should be compatible with the information provided in the program summary and in the program documents listed in Appendix A. Assumptions, which are basically informed judgments concerning future conditions, clarify and limit the scope of an estimate in relation to the acquisition milestone and program phase.

5.5    ESTIMATE DOCUMENTATION

    The documentation should be tailored to the scope and level of detail of the estimate. Supporting data and other information too complex for inclusion in the body of the estimate should be indexed and presented in appendices. The documentation should provide enough detail for the estimate to be replicated by another analyst. The documentation section consists of the following subsections:

• Primary Methodology/Models. Identifies the methodology and models used to develop the O&S estimate. The basis for selecting a particular estimating methodology or model also is described. CERs, or factors developed for the estimate, must be fully documented. The process used to validate newly created CERs and models must also be described. All models used, along with complete details regarding any parametric input or output and any calibration or adjustment, must be described. Applications and limitations must be identified. If possible, a copy of the cost model and data input should be provided on a disk with the cost estimate.
• Cost Element Documentation. Each cost element should be fully documented, so that it can be replicated by a competent analyst using the same assumptions, methods, and data. The detail must include or reference the data bases used to support parametric and analogous estimates, and must state how judgments were made for parametric inputs and describe the analogy complexity or scaling factors used in the calculations. Clear documentation and access to the data bases is essential. The cost estimate should be tied to the data bases, and the data bases used should be qualified with respect to the type of data represented (i.e., actual, budget estimates, or development test data). The documentation for each cost element should include the following:
  • A definition of the cost element, if it differs from the definition contained in the CES appendix;
  • A description of how the cost for each element was derived;
  • A list of the CERs used and an explanation of each (including applicable range for independent variables);
  • A definition of each input variable;
  • A list of the values assigned to the input variables;
  • The mathematical computation used in deriving the estimate;
  • An identification of significant factors that drive costs within each element (such as average manning, grade, special skills or training, operating hours, and material consumption); and
  • An identification of each data source, the specific data obtained, and any adjustments made to the data.
• Uncertainty Assessment. Cost uncertainty is inherent in any estimate. It results from the potential for unplanned system changes, technical problems, performance deficiencies, and estimating errors, etc. The purpose of the uncertainty analysis is to "bound the estimate." A point estimate cannot reflect the uncertainties inherent in a calculation, as it implies a precise cost; a range of costs should therefore be provided to allow for cost-estimating uncertainty. The range can be derived objectively through statistical analysis, or subjectively through the use of expert opinion. The use of an arbitrary "plus-minus" (+/-) percentage to qualify the total estimate is not an adequate uncertainty analysis.
• Program Cost Drivers. The level of confidence in any O&S estimate is a function of the sensitivity of the input factors to potential change. Key cost drivers should be identified in order to determine the cost impact of changes in performance characteristics, reliability, maintainability, and operating tempo. Each potential change should be tested independently. The operating and support policy for the system should also be reviewed to determine if it is a prime cost driver (i.e., if a system requires 24-hour manning, improvements in reliability will do little to reduce manning requirements).
• Sensitivity Analysis. Sensitivity analysis of suspected cost drivers places the uncertainty associated with an estimate in the proper perspective. It permits decisions influencing the design, reliability, manning policy, and operating tempo of a weapon system to focus on those elements having the greatest impact on cost. The sensitivity of costs to changes in operating parameters (such as activity rates and performance characteristics) should be examined, with the parameters varied individually. The use of an arbitrary (+/-) percentage to qualify the total estimate does not constitute an adequate sensitivity analysis. The results of the sensitivity analysis may be presented in the format shown in Exhibit 6-3. Where quantification of uncertainties proves impractical, a qualitative assessment of the variation should be made.

5.6    SUMMARY

    The results of the estimate should be summarized and presented at the end of the documentation. They should be portrayed in a manner that focuses attention on the impact of O&S costs for each element and for the total system. The summary may compare the O&S costs of each alternative with those of one or more reference systems, identify cost drivers, discuss the sensitivity of key variables to change, and identify major differences from the previous estimate. Presentation formats are discussed in Chapter 6. Although not all of the formats may be used in any given assessment, they are provided to assist the analyst in capturing, comparing, analyzing, and documenting O&S costs. As discussed in Chapter 6, certain formats are recommended for use in DAB briefings. Other formats are intended for use in documenting the estimate. The cost estimate provided for each element must track to the cost element documentation discussed in section 5.5. The cost estimate should be summarized in constant dollars of the present budget year and in then-year dollars (if required) for each fiscal year and appropriation category.

• Presentation Formats. The presentation formats described in Chapter 6 provide a standard framework for portraying the results of O&S estimates. They promote consistency among estimates with respect to level of detail, and they minimize the variations in format that characterize some cost submissions. The formats also promote consistency in the evaluation process and facilitate the comparison of estimates submitted at various milestones.
• Comparison Track. The documentation should identify the amount and reasons for any significant cost changes between the current and prior estimate. If a number of alternatives are being compared, a summary and explanation of the differences in their costs should be provided. The comparison and documentation of differences should be accomplished in conjunction with the preparation of each applicable format.

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