AMERICA’S ARMY: THE STRENGTH OF THE NATION
CBA 4-DAY TRAINING SLIDES
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Cost-Benefit Analysis (CBA)
Four-Day Training Briefing
Step 3: Define Alternatives
Version 3.0 (Draft)
Last Updated: 10 November 2011
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Four-Day CBA Training Schedule
Monday
UNCLASSIFIED
CBA Introduction and
Overview
Step 1:
Problem/Opportunity
and Objective
Step 2: Define CBA
Boundaries and
Parameters
Tuesday
Step 3: Define Alternatives
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Step 6: Alternative
Selection Criteria
Step 4: Develop Cost
Estimates for Each
Alternative
Step 7: Compare
Alternatives
Mini-case # 4
Step 8: Report Results and
Recommendations
Step 5: Benefits
Mini-case #5, 6
Mini-case #1, 2, 3
Wednesday
Thursday
Capstone Case Study
Presentation and Review
Mini-case Exercises: #7, 8
Capstone Case Study
Groups Meet
Capstone Groups
Assigned
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Day 2 Agenda
• 0830 – 0915: “Step 3: Define Alternatives”
• 0930 – 1200: “Step 4: Developing Cost Estimates for
Each Alternative” and Mini-case #4
• 1200 – 1300: Lunch
• 1300 – 1630: “Step 5: Benefits” and Mini-case exercises
#5 and 6
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Step 3: Define Alternatives
1. Define Problem/Opportunity and Objectives
Use problem solving techniques to identify innovative and
robust alternatives.
2. Define Scope; Formulate Facts and
Assumptions
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• Alternatives:
3. Define Alternatives
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4. Develop Cost Estimate for Each Alternative
– Potentially optimal solutions to the
Problem Statement, given Scope, Facts,
Assumptions, and Constraints.
– They should include the status quo or
current state, if applicable.
5. Identify Quantifiable and Non-Quantifiable
Benefits
6. Define Alternative
Selection Criteria
7. Compare Alternatives
8. Report Results and Recommendations
Questions for the reviewer:
- Have all feasible alternatives been considered to include alternatives that
represent creative thinking?
- Have the alternatives been defined and described clearly 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?
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Define the Status Quo
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Status Quo (“As-Is” state):
• The status quo is the “baseline” program, process, or system: the solution
that will exist if everything proceeds along the current trajectory.
• The CBA must be forward-looking, not historical. Therefore, the status quo is
not always static—it must account for scheduled changes that might occur
within the timeframe of the analysis.
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Assess the Status Quo for Viability
Is the status quo a viable alternative?
• Ask this question: Can the status quo solve the problem, given the scope
and facts/constraints we’re dealing with?
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– Yes: Status quo is viable
– No: Status quo is not viable
• For example:
– Problem: A storage depot is given a new task to store sensitive items that
cannot be exposed to the weather
– Fact: Existing storage facilities are concrete pads with overhead cover but no
walls
– Conclusion: Status quo cannot solve the problem and is therefore not viable
If the status quo is not viable:
 It should still be costed and mentioned in the CBA.
 In the CBA, explain why the status quo was rejected
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Developing Alternative Courses of Action
• Beyond defining the status quo, there is no prescribed doctrine or
methodology for developing other courses of action.
• So long as facts, assumptions, and scope are taken into account,
any COA that falls within the boundaries and parameters thus
defined can be a potential solution to the problem statement.
Only COAs that are potentially optimal solutions should be
included in the CBA.
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Developing Alternative Courses of Action
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• The number of possible COAs generally increase with the number of decisions
being made.
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Developing Alternative Courses of Action
• The set of COAs included in a CBA should
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– be potentially optimal solutions to the problem
– represent the potential range of solutions
• COAs should not
– be “anchored”: they should not be affected by a psychological bias
towards a favored alternative.
– be subsets of each other—the COAs should not all be different “flavors” of
the same alternative.
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Developing Alternative Courses of Action
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• For example, if the objective of a CBA is to determine what four-passenger car
to buy, and if the selection criteria are cost and reliability:
– Including just Mercedes and Porsche as the two COAs under consideration would
not cover the span of possible solutions. It can only be representative of those
solutions that are both expensive and reliable.
– Including a COA that purchases a used car with 300,000 miles would also be
unreasonable—this is not likely to be a reliable car and clearly not a potentially
optimal solution.
– A set of COAs that spans a wider range of possible solutions and is also potentially
optimal (i.e., spanning a wide range of costs and all reliable) might be COA1: New
Porsche Panamera, COA2: New Toyota Corolla, COA3: Used Nissan Maxima with
80,000 miles.
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Example: Finding Optimal Solutions
U.S. Army Central Command has secured $198M for the
procurement of two different models of the “HIMARS
2” multiple rocket launcher—class X and class Y—for
deployment to Afghanistan. The class Y HIMARS 2 costs
$9M each and weighs 27,000 pounds. The class X
HIMARS 2 costs $11M and weighs 12,000 pounds. After
procurement, all the HIMARS 2 will be transported to
Afghanistan by a fleet of C-130 Hercules aircraft, each
with a total maximum payload of 405,000 pounds.
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Example: Finding Optimal Solutions
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How do you maximize the total number of HIMARS
procured?
If you buy only Class X, you can afford 18.
If you buy only Class Y, you can carry 15.
So is “buy 18 Class X HIMARS” the optimal solution?
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Example: Finding Optimal Solutions
COA 2
COA 3
COA 4
COA 1 (Status Quo)
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Example: Finding Optimal Solutions
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You can procure 9 Class X and 11 Class Y HIMARS,
for a total of 20.
Moral of the exercise: analysis is sometimes
necessary to determine the optimal solution.
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Suggested Methods for COA Development
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• DOTMLPF: A methodology used by JCIDS to brainstorm possible
solutions within the dimensions of Doctrine, Organization,
Training, Materiel, Leadership, Personnel, and Facilities.
• Consult Stakeholders, team members, and subject matter
experts.
• Mathematical analysis and/or optimization.
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Courses of Action
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Common mistakes
• Proposing the hoped-for course of action along with several
obviously less attractive options in an attempt to force the
decision in favor of one COA. In other words: presenting only one
feasible option.
• Adding a course of action where the main difference is the funding
solution
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Developing Alternatives: Example 1
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Situation
Because of BRAC moves, the transportation office will have to process property shipments
for three times the number of people that it normally supports. The current process is
based on face-to-face meetings with individuals and manual preparation of forms. The
increased workload level will last for 3-4 years.
Conventional Solution
Since workload is increasing by a factor of three, the solution is to triple the office’s
manpower.

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
Innovative Problem Solving
Don’t assume that existing policies, procedures, and standards cannot be changed.
Consider wide range of solutions, such as:
 Increase manpower staffing
 Outsource part of the process
 Automate the preparation of forms
 Reduce time for face-to-face meetings by enabling individuals to conduct part of the
interview online
 Challenge existing requirements for forms and data collection (i.e., the policies and
rules that govern the process)
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Developing Alternatives: Example 2
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• Problem Statement: a review panel has determined that an
annex facility in Arlington, VA housing an Army weapons costing
division does not meet information security requirements.
• Possible alternatives:
– Determine unmet requirements, and install the necessary modifications
to meet them.
– Move the costing division to another facility that meets security
requirements.
– Keep the costing division in its current facility, but only allocate work with
a non-sensitive classification.
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Developing Alternatives: Exercise
Due to BRAC, it is anticipated that demand for electric power at Ft. Good will
decrease by 40%. There are currently five separate power plants supplying
electricity exclusively to Ft. Good, with full operational capacities of 1.2 GW
(gigawatts), 1.8 GW, 0.8 GW, 1 GW, and 1.5GW. Normal operational capacity is
75%. To run each plant, there is a fixed cost of $1M per month, and a variable
cost of $0.5M per GW-month. If the objective is to reduce cost where
possible, propose at least four alternative courses of action for this (fictional)
scenario.
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Review Exercise: Henry Ford
• In a rented garage at 58 Bagley Street in Detroit, Henry Ford
completed his first gas-powered car on the morning of June 4,
1896. He had spent $250 FY1896 dollars on equipment to build
the car, and $100 on labor. The garage cost $15 per month to
rent. After the car was assembled, it was clear that it would not
be able to fit through the door of the rented garage. The car was
to be used as a model for the two-year long test-driving phase of
his R&D process, with the final goal of arriving at a model for
mass production and sale. Define possible alternative Courses of
Action.
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