Army Cost Benefit Analysis
A Case Study
Battle Assembly Travel Reimbursement
Developed based on information provided by
Mr. Mario F. Wozniak
Chief, Reserve Personnel Army (RPA), Budget Division
US Army Reserve Command G8
Author: Mr. William T. Huddleston, MSOR, MSME
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
A Case Study
Terminal Learning Objective
• Task: Perform Army Cost Benefit Analysis
• Condition: You are training to become an ACE
with access to ICAM course handouts, readings,
and spreadsheet tools and awareness of
Operational Environment (OE)/Contemporary
Operational Environment (COE) variables and
actors
• Standard: with at least 80% accuracy:
• Review the Army 8 Step Cost Benefit Analysis process
• Apply Cost Benefit Analysis to the Battle Assembly case
Author: William T. Huddleston, MSOR, MSME
Government Management Institute
©
3
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Army Reserve Command
Overview
Army Reserve Command
Leadership
A 3- star General leads the US Army Reserve Command and
holds the following two titles:
1.
Chief, Army Reserve (CAR): Reports to Chief of Staff of
Army; represents Army Reserve in policy and planning
discussions with Army, Department of Defense and
Congress
2.
Commanding General (CG) of the US Army Reserve
Command (USARC): Reports to Army Forces Command;
responsible for staffing, training and readiness of most
Army Reserve units in continental US and Puerto Rico
Army Reserve Command
Mission
Provide trained, equipped, and ready Soldiers and cohesive units to
meet the global requirements across the full spectrum of
operations. The Army Reserve is a key element in The Army multicomponent unit force, training with Active and National Guard units
to ensure all three components work as a fully integrated team.
Responsibilities
• Operational tasks; training, equipping, managing, supporting,
mobilizing, retaining Soldiers
• Troop Program Unit (TPU) Soldiers; Commands, controls,
supports Army Reserve troop units CONUS.
Exception: Psychological Operations and Civil Affairs units
• Ensures readiness of forces; prepares over 1,700 units to
mobilize and deploy to wartime theater
Army Soldier Profile (FY09)
1,112,703 Soldiers
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Travel reimbursement is an existing issue within the ARC.
“Soldier reimbursement of travel expenses to a
Battle Assembly (BA)”
BA consist of monthly drills;
soldiers practice military skills
to maintain individual and unit
readiness in case of mobilization
and deployment
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Request initiated by US Army Reserve Command to:
Extend National Defense Authorization Act (NDAA) to:
• Authorize travel reimbursement for “specified group”
of Soldiers traveling to Battle Assembly outside
normal commuting distance (>150 miles) especially;
- Soldiers with critical Military Occupation
Specialties
- Soldiers affected by Base Realignment and Closure
(BRAC)
- Units with designated leader shortages
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Army Reserve Command (ARC) request to reimburse
travel related expenses is based on:
- Impact on morale, and personal finance issues for AR
soldiers
- Increased recruiting and training costs associated with AR
Soldiers lost through attrition
- Adverse impact to Operational Readiness by loss of
Soldiers in critically needed categories through attrition
- ARC’s Continuous Improvement effort modeling
(ARFORGEN) and minimize “cross leveling”
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Travel reimbursement to ARC Soldiers’ required to
travel more than 150 miles to BA is being considered
for several reasons:
- Maintaining competitive edge by providing more benefits
and promotion opportunities for skilled AR soldiers
- AR promotions require some reservists move to new units
beyond normal commuting distance
- Maintaining camaraderie with fellow Soldiers is highly
valued in ARC
- BRAC is increasing soldier travel distance for BA and this is
expected to impact more reservists with additional base
closures
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Assumptions:
- Operational Readiness is a high command objective
- ARC desires to support continuous improvement modeling
(ARFORGEN’s enhancement is very important)
- Economic conditions, promotions, Base Realignment and
Closure (BRAC), and desire for Soldiers to stay in unit, result in
increased number of soldiers traveling >150 miles to BA
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Assumptions (continued):
- Annual “out-of-pocket” Soldier expense is estimated between
$500-$4,000 for travel to BA. Case will average travel expenses
to Battle Assembly (BA) = $1,500
- Recruiting and training cost is estimated at $75,000 per Soldier
- Operational Readiness is impacted when critically needed
Soldiers leave service
- Inflation rate 2% per year
- Estimate travel reimbursement costs for 1 year and 10 years
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Assumptions (continued):
- Army reserve staff level = 205,000 soldiers
- 5,000 AR soldiers are affected by BRAC; 2,500 or half of these
soldiers are considered critical or skilled positions
- 50,000 AR soldiers travel > 150 miles to BA; 24,000 are
considered critical or skilled positions
- Predict current AR soldier attrition rate decrease 0.5% if
critically needed Soldiers are reimbursed for travel
- Not all AR soldiers will be reimbursed for travel expenses
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
The commander identified some non-quantifiable factors that
could be considered in a CBA:






Image to general public
Soldier value perception
Soldier home financial stability
Soldiers’ morale is important
Increased Operational Readiness
ARFORGEN enhancement
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Cost Benefit Analysis (CBA)
Review
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
What is Cost Benefit Analysis?
A
of comparing both
and
costs and
benefits (positive/negative), against specified
Courses of Action (COA) to determine the best
.
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
What is Cost Benefit Analysis?
A structured methodology of comparing both
quantifiable and non-quantifiable costs and
benefits (positive/negative), against specified
Courses of Action (COA) to determine the best
enterprise solution.
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Why do we need a Cost Benefit Analysis?
1.
2. When making resourcing decisions:
• Treat cost (both near and long term) as an
upfront consideration, not as an afterthought
• Obtain visibility of project value and positive and
negative consequences to a decision path
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Why do we need a Cost Benefit Analysis?
1. To make a better use of limited funds
2. When making resourcing decisions:
• Treat cost (both near and long term) as an
upfront consideration, not as an afterthought
• Obtain visibility of project value and positive and
negative consequences to a decision path
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Overview
Army CBA 8 Step Process
1.
2.
3.
4.
5.
6.
7.
8.
Define and scope the problem/opportunity
Formulate assumptions and constraints
Define alternatives
Develop cost estimate for alternatives
Identify quantifiable and non-quantifiable benefits
Define alternative selection criteria
Compare alternatives
Report results and recommendations
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
COST
 Quantifiable cost





Direct
Indirect
Initial/Start-up
Sustainment
Procurement
 Non-quantifiable





Life/Safety/Health
Perception/Image
Opportunity
Risk/Uncertainty
Political
1. Define and scope the
problem/opportunity
2. Formulate assumptions
and constraints
3. Define alternatives
4. Develop cost estimate
for alternatives
5. Identify quantifiable
and non-quantifiable
benefits
6. Define alternative
selection criteria
7. Compare alternatives
8. Report results and
recommendations
BENEFITS
 The sum of quantifiable
and non-quantifiable
benefits:
 Quantifiable benefits
 Cost avoidances
 Non-quantifiable benefits
BENEFITS MUST BALANCE
BB OR OUTWEIGH COST





Greater capacity
Faster availability
Better quality
Improved moral
Other
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
Battle Assembly Travel Reimbursement
Case Study
Team Exercise
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
Case Study Instructions
• Break up the class into 4 teams
• Each team is tasked to respond to all 8 steps of the CBA
process.
• Time will be provided for the teams to discuss each process
step. After team discussion, each team will present their
findings.
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Discussion
1. Define and Scope the Problem / Opportunity
Questions for the Reviewer
- Does the problem statement define a clear, unambiguous
issue?
As appropriate, does the objective reflect an enterprise
perspective?
- What major stakeholders are likely to be impacted?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study Discussion
2. Formulate Assumptions and Constraints
Questions for the Reviewer:
- Are the assumptions realistic? Were they provided by an
appropriate subject matter expert?
Are the assumptions or facts structured in a way that
favors one alternative COA?
- Do the assumptions, and facts clearly identify the natural
and/or artificial limits or expansions placed on the
solution set?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
3. Define Alternative Courses of Action
Questions for the Reviewer:
- Have all feasible alternatives been considered, to include
alternatives that represent creative thinking?
- Have the alternatives been defined or described clearly, and to
a sufficient level of detail to support the development of a cost
estimate?
- Is the status quo included, or is its absence explained?
- Do the alternatives span a reasonably wide range of potential
solutions?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
4. Develop Cost Estimate for each Alternative
Questions for the Reviewer:
- Does the cost estimate span the appropriate life cycle?
- As appropriate, does the documentation clearly differentiate
between a cost-perspective estimate and a POM/budgetperspective estimate?
- Are the cost estimates for each COA structured in a way that
supports apples-to-apples comparison?
- Is the cost estimate backed up by supporting documentation:
- Data sources identified?
- Rationale and methodology explained?
- Analysts/POCs identified?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
5. Identify Quantifiable and Non-Quantifiable
Costs and benefits
Questions for the Reviewer:
- Do the perceived benefits reflect an enterprise
perspective?
- Are the benefits consistent with the problem statement?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
6. Define Alternative Selection Criteria
Questions for the Reviewer:
- Are the selection criteria appropriately tailored to the
problem statement or requirement?
- Has appropriate consideration been given to both cost and
non-cost criteria?
- If weighting of selection criteria has been used, has the
leader agreed with the weighting?
- Do the selection criteria appear unrealistically skewed to
favor one alternative?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
A “Cost-Benefit Balance” Visual
Alternative #1: No Travel
Reimbursement
No incremental benefits or costs
Cost
Benefit
$0
$0
BENEFITS MUST BALANCE
BB OR OUTWEIGH COST
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
A “Cost-Benefit Balance” Visual
Cost
Alternative #2: All Reservists
Are Unquantifiable Benefits in
morale and readiness worth $56M?
$75M
Benefit
Readiness
Morale
$19M
BENEFITS MUST BALANCE
BB OR OUTWEIGH COST
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
A “Cost-Benefit Balance” Visual
Alternative #3: Critical & BRAC only
Cost
Are Unquantifiable Benefits in morale
and readiness worth $27M?
Benefit
Readiness
$36M
$44M
Morale
$11M
BENEFITS MUST BALANCE
BB OR OUTWEIGH COST
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
A “Cost-Benefit Balance” Visual
Alternative #4: BRAC only
Are Unquantifiable Benefits in morale
and readiness worth $14M?
Cost
Benefit
Readiness
$8M
Morale
$2M
BENEFITS MUST BALANCE
BB OR OUTWEIGH COST
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Making a decision requires answering the
questions on the previous slides
How can you evaluate and compare the
non-quantifiable costs and benefits?
The Decision Matrix is one method of
comparing alternatives
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
7. Compare Alternatives
Questions for the Reviewer:
- Does the analysis clearly demonstrate how the
recommended COA best satisfies the selection criteria?
- Is the recommended billpayer consistent with Army
priorities? Do the benefits of the recommended COA
justify the billpayer?
- Are second- and third-order effects identified, and are the
negative impacts acceptable?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
8. Report Results and Recommendations
Questions for the Reviewer:
- Does the package contain all key elements, accompanied by
supporting documentation?
- Does the recommended COA address the problem, and is it
consistent with the assumptions and constraints?
- Does the analysis explain how the recommended COA is
best at satisfying the selection criteria?
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Step 8: Report Results and Recommendations
Executive Summary
• Problem:
• Brief description of methodology and number of COAs considered
to determine the best menu choice.
• Existing or new funding?
• Recommendation:
• Cost to Implement:
– $
– Other:
39
Battle Assembly Training
Case Study
Instructor’s Support Material
Battle Assembly Training Instructor’s Support Material
• Length Time: 4h
– Briefing 15-20 min, break out in teams to prepare each of the
points average 10 min per point area, presentation and discussion
average 15 min per point, wrap up 15-20 min.
• Process
–
–
–
–
Introduce the case
Break the class into groups of 4
Each group needs to prepare material for presentation results
Use the excel templates as applicable
• Presentation
– Discuss findings with participants and agree on main points to
ensure that they are on the right truck
– Introduce support for each point after students’ presentation
Battle Assembly Training Instructor’s Support Material
Objectives:
• Apply the CBA and by using it:
• bring out the issues at hand
• think though possible alternatives and support
• Point to the:
- Ranking process, and
- Weight sensitivity since these are the key areas influencing
the decision
- Realize the need for support for a cost informed decision
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
1. Define and Scope the Problem / Opportunity
ARC soldiers are adversely impacted by having to pay
travel costs to attend Battle Assembly.
Compare costs and benefits of extending travel
reimbursement to ARC Soldiers traveling to BA.
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
2. Formulate Assumptions and Constraints
- Current law does not allow for reimbursement of Soldier travel
to Battle Assembly
- Limit travel reimbursement to soldiers traveling greater than
150 miles to BA
- Estimate 50,000 Soldiers travelling to BAs are not reimbursed
- 24,000 of the 50,000 Soldiers have critical skills positions
- Soldiers spend average $1,500 annually traveling to BAs
- ARC Soldier attrition rate = 20%
- Travel reimbursement can reduce ARC attrition by .5%
- AR staff level = 205,000 Soldiers
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
2. Formulate Assumptions and Constraints
- Economic conditions, Soldier promotions as well as BRAC
increase travel distance to Battle Assembly
- 5,000 AR Soldiers effected by BRAC
- 2,500 Soldiers impacted by BRAC have critical skills
- Annual training for new recruits averages $75,000
- Operational Readiness is extremely important
- Soldier morale very important
- ARFORGEN enhancement is very important
- Not all AR Soldiers can be reimbursed for travel to BA
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
2. Formulate Assumptions and Constraints
- Calculate costs for 1 year and 10 years
- Use 2% inflation rate
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
3. Define Alternative Courses of Action
1. No travel reimbursement to Battle Assembly (Status Quo)
2. Reimburse all Soldiers travelling to Battle Assembly greater
than 150 miles
3. Reimburse only critically needed Soldiers and Soldiers
impacted by BRAC travelling to Battle Assembly greater than
150 miles
4. Reimburse only Soldiers impacted by BRAC travelling to
Battle Assembly greater than 150 miles
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Cost Estimate
4. Develop Cost
Estimate for each
Course of Action
(COA)
Battle Assembly Travel Reimbursement
($'s in Millions)
COA # 1
Travel cost
Training Cost Savings
Total
COA # 2
Travel cost
Training Cost Savings
Total Inc Cost
COA #3
Travel cost
Training Cost Savings
Total
COA #4
Travel cost
Training Cost Savings
Total
No Battle Assembly Travel Reimbursement
1 year cost
10 year cost
FY12
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Reimburse all Soldiers traveling > 150 miles to BA
1 year cost
10 year cost
FY12
75.00
821.23
75.00
-18.75
-205.31
-18.75
56.25
615.92
56.25
Reimburse Critically Skilled and BRAC
1 year cost
10 year cost
43.50
476.31
-10.88
-119.08
32.63
357.23
Reimburse BRAC only
1 year cost
10 year cost
7.50
82.12
-1.88
-20.53
5.63
61.59
FY12
43.50
-10.875
32.63
FY12
7.5
-1.875
5.63
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
4. Develop Cost Estimates For Alternatives
COST
Travel
Reimbursement Cost
COA #1
No travel
reimbursement
(Status Quo)
QUANTIFIABLE
1 year
$0
10 years
$0
NON
QUANTIFIABLE
Public Image
Operational
Readiness
Morale
COA #2
Reimburse all
Soldiers
travelling >150
miles
COA #3
Reimburse
Critical
Soldiers and
BRAC
travelling >150
miles
COA #4
Reimburse only
BRAC Soldiers
travelling >150
miles
$75M
$43M
$8M
$821M
$476M
$82M
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
• Step 5. Identify
Quantifiable and
Non-quantifiable
Benefits
• The primary
benefit is reduced
attrition
• Soldiers lost
through attrition
must be replaced,
increasing training
costs
COA #12
Reimburse all
AR soldiers = 205,000
Training cost 75,000 per soldier annually
Reduced Attrition rate = 0.5%
Annual training Savings
# AR Soldiers travel > 150mi = 50,000
Avg Travel Reimbursement Cost = $1,500
total annual travel reimburse cost
Inflation 2% per year
205,000
soldiers
75,000
dollars
250
soldiers
-18,750,000 training dollars
50,000
soldiers
1,500
dollars
75,000,000 travel dollars
COA #3
Reimburse only
Critically skilled
And BRAC
AR soldiers = 205,000
Training cost 75,000 per soldier annually
Reduced Attrition rate = 0.5%
Annual training Savings
# AR Skilled Soldiers travel > 150mi =
24,000
# BRAC Soldiers travel > 150mi = 5000
Avg Travel Reimbursement Cost = $1,500
total annual travel reimburse cost
Inflation 2% per year
205,000
soldiers
75,000
dollars
145
soldiers
-10,875,000 training dollars
AR soldiers = 205,000
Training cost 75,000 per soldier annually
Reduced Attrition rate = 0.5%
Annual training Savings
# BRAC Soldiers travel > 150mi = 5000
Avg Travel Reimbursement Cost = $1,500
total annual travel reimburse cost
Inflation 2% per year
205,000
soldiers
75,000
dollars
25
soldiers
-1,875,000 training dollars
5,000
soldiers
1,500
soldiers
7,500,000
dollars
COA #4
Reimburse
BRAC only
24,000
soldiers
5,000
soldiers
1,500
dollars
43,500,000 travel dollars
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
5. Identify Quantifiable and Non-quantifiable Benefits
BENEFIT
Training Cost
Savings
QUANTIFIABLE
1 year
10 years
NON
QUANTIFIABLE
COA #1
Status quo: No
Reimbursement
for travelling
>150 miles
None
None
COA #2
Reimburse all
Soldiers
travelling
>150 miles
COA #3
Reimburse critical
and BRAC Soldiers
travelling >150
miles
COA #4
Reimburse only
BRAC Soldiers
travelling >150
miles
$19M
$205M
$11M
$119M
$2M
$21M
• Increased
Operational
Readiness
• Enhance
ARFORGEN
• Increased
Soldier
morale
• Increased
Operational
Readiness
• Enhance
ARFORGEN
• Increased
Soldier morale
• Increased
Operational
Readiness
• Enhance
ARFORGEN
• Increased
Soldier morale
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
Case Study
6. Define Alternative Selection Criteria
-
Cost of travel reimbursement 1 year
Cost of Travel reimbursement 10 years
Training Cost Savings 1 year
Training Cost Savings 10 years
Soldier morale, value perception, and
personal finance stability
- Improved Operational Readiness and
enhancement to ARFORGEN
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
7. Compare Alternatives
Decision Matrix
COA #1
COA #2
No Travel Reimbursement
Criteria
COA #3
Reimburse All
Travel Reimburse Cost (+) 1 yr
10%
0.0
4
0.4
75.0
1
0.1
43.5
2
0.2
7.5
3
0.3
Travel Reimburse Cost (+) 10 yrs
20%
0.0
4
0.8
821.2
1
0.2
476.3
2
0.4
82.1
3
0.6
Training Cost Savings(-) 1 yr
10%
0.0
1
0.1
-18.8
4
0.4
-10.9
3
0.3
-1.9
2
0.2
Training cost Savings(-) 10 yrs
20%
0.0
1
0.2
-205.3
4
0.8
-119.1
3
0.6
-20.5
2
0.4
Morale / Good Will
20%
1
0.2
4
0.8
3
0.6
2
0.4
Operational Readiness
20%
1
0.2
4
0.8
3
0.6
2
0.4
Best
Acceptable
Marginal
Worst
4
3
2
1
Data
Reimburse BRAC only
Data
Rankings
Rank Score
Reimburse Critical and BRAC
Weight
100%
Rank Score Data
COA #4
Rank Score Data
Rank Score
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1.9
3.1
2.7
2.3
Army Cost Benefit Analysis
Battle Assembly Travel Reimbursement
8. Report Results and Recommendations
Executive Summary
The Army Reserve is considering reimbursing AR soldiers that must travel greater than 150 miles to
Battle Assembly.
Four Courses of Action (COAs) were developed to determine if travel reimbursement to BA is feasible
All COAs require additional resources as travel costs are only partially offset by training cost savings.
Recommendation: Implement COA #2: Reimburse all AR Soldiers traveling greater than 150 miles to
Battle Assembly
•Cost to implement COA 2:
•Travel Cost s:
•Training Cost Savings:
•Net ARC Costs:
FY12
FY 12
FY12
$75M
$18.8M
$ 56.2M
FY12-21
FY12-21
FY12-21
$821.2M
$205.3M
$615.9M