Headquarters U.S. Air Force
Integrity - Service - Excellence
Air Force Cost Analysis in 2011
Mr. Rich Hartley
Deputy Assistant Secretary of the Air Force
(Cost and Economics)
1
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

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“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)
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FY11 APOM: 20 Programs, 34% of AF Investment
FY12 POM: 48 Programs, 42% of AF Investment
Successes:

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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:



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NACAs earlier to influence MAJCOM POMs
Increase PEM involvement
Acceptance maturing
Expand SIPRNET access
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Cost in AF POM
Portfolio Cost Risk Assessment Example
Portfolio 1 Sub-total (TY$M)
Estimates
POM Funding
Funding Estimate Delta
G
FY12
93.7
117.2
23.5
Portfolio 2 Sub-total (TY$M)
Estimates
R
POM Funding
Funding Estimate Delta
Portfolio 3 Sub-total (TY$M)
Estimates
POM Funding
Funding Estimate Delta
Y
G
NACA 0 - 5% > PB
FY14
84.0
142.8
58.8
FY15
91.7
126.6
34.9
FY16
96.8
0.0
(96.8)
Subtotal
FY16
12-16
872.5
4,600.2
FY12
815.8
FY13
953.2
FY14
974.6
FY15
984.2
652.9
(162.9)
656.0
(297.1)
680.6
(293.9)
681.4
(302.8)
631.1
(241.4)
3,302.1
(1,298.1)
FY13
1,281.5
1,216.8
(64.7)
FY14
1,021.6
1,051.3
29.7
FY15
1,159.0
1,215.0
56.0
FY16
1,787.5
1,182.7
(604.8)
Subtotal
12 -16
6,524.0
5,910.0
(614.0)
FY12
1,274.4
1,244.1
(30.3)
Y
FY13
103.4
120.0
16.6
Subtotal
12-16
469.6
506.6
37.0
NACA 6 – 24% > PB
R
NACA > 25% of PB
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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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FY 2011 NDAA
Sec 811
 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.
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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
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EELV
Global Hawk
F-22 Mod JAT
F-135 JAT

Potential Future

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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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NDAA 2011 Sec 811
SEC. 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 than
80 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 new
paragraph (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 TARGETS
FOR CONTRACT NEGOTIATION PURPOSES.—(1) The policies, procedures, and guidance issued by the Director of Cost Assessment
and 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 on
the Government’s reasonable expectation of successful contractor performance in accordance with the contractor’s proposal
and previous experience.
‘‘(2) The Program Manager and contracting officer for each major defense acquisition program and major automated information system
program shall ensure that cost analyses and targets developed for the purpose of contract negotiations and the obligation of funds
are carried out in accordance with the requirements of paragraph (1) and the policies, procedures, and guidance issued by the Director
of Cost Assessment and Program Evaluation. ‘‘(3) Funds that are made available for a major defense acquisition
program 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 with
the 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 established
procedures, only if determined to be excess to program needs on the basis of a cost estimate developed with the concurrence
of the Director of Cost Assessment and Program Evaluation.’’.
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