Slides 6 2 perform army cost benefit analysis

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 ski

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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

A Case Study

Battle Assembly Travel Reimbursement

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A Case Study

Battle Assembly Travel Reimbursement

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Terminal Learning Objective

3

Author: William T Huddleston, MSOR, MSME Government Management Institute

©

• 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

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Army Reserve Command

Overview

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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

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•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

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Army Soldier Profile (FY09)

1,112,703 Soldiers

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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

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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

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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”

Case Study Overview

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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

Case Study Overview

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- 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

Case Study Overview

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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

Case Study Overview

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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

Case Study Overview

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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

Case Study Overview

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Cost Benefit Analysis (CBA)

Review

Case Study Overview

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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

.

Case Study Overview

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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.

Case Study Overview

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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

Case Study Overview

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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

Case Study Overview

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Army CBA 8 Step Process

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

Case Study Overview

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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

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Battle Assembly Travel Reimbursement

Case Study

Team Exercise

Case Study

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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

Case Study

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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?

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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?

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Case Study

3 Define Alternative Courses of Action

- 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?

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Case Study

4 Develop Cost Estimate for each Alternative

- Does the cost estimate span the appropriate life cycle?

- As appropriate, does the documentation clearly differentiate between a cost-perspective estimate and a POM/budget-

perspective 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?

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Case Study

5 Identify Quantifiable and Non-Quantifiable

Costs and benefits

- Do the perceived benefits reflect an enterprise perspective?

- Are the benefits consistent with the problem statement?

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Case Study

6 Define Alternative Selection Criteria

- 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?

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No incremental benefits or costs

A “Cost-Benefit Balance” Visual

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BB

BENEFITS MUST BALANCE OR OUTWEIGH COST

Alternative #2: All Reservists Are Unquantifiable Benefits in morale and readiness worth $56M?

$75M

Morale

$19M

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Alternative #3: Critical & BRAC only Are Unquantifiable Benefits in morale

and readiness worth $27M?

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Alternative #4: BRAC only Are Unquantifiable Benefits in morale

and readiness worth $14M?

$8M

$2M

Morale Readiness

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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

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Case Study

7 Compare Alternatives

- 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?

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Case Study

8 Report Results and Recommendations

- 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?

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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:

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Battle Assembly Training

Case Study

Instructor’s Support Material

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– 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

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• 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

Battle Assembly Training - Instructor’s Support Material

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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

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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

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