comet brief morss v5 2 ppt97

Impact of Variable Indirect Costs on Assessment of VC-8 TA-4J Skyhawk Services Costs…: 

Impact of Variable Indirect Costs on Assessment of VC-8 TA-4J Skyhawk Services Costs… 68th MORS Symposium: 20-22 June 2000 CDR Dave Tiller, Naval Center for Cost Analysis (NCCA) tiller.david@hq.navy.mil www.ncca.navy.mil DSN 764-2625, Comm (202)764-2625 …A Cost Assessment of Organic Resources vs. Outsourcing

Introduction: 

Introduction Purpose… Present a better way of costing changes (increase or decrease) in Sea Billet (i.e., “Warrior”) end-strength… Show that methodology used to develop Navy variable indirect manpower costs are not Navy-centric…. Methodology applicable to all services…. Demonstrate impact of variable indirect manpower cost on real-world assessment of Fleet Composite Squadron EIGHT (VC-8) TA-4J air services… Provide insight into application of variable indirect manpower costs for manpower-to-manpower, manpower-to-machine, and organic vs. outsourcing analyses… If there’s One, and Only One Take-Away… 707 Rule of Thumb

Background: 

Navy reducing # of type/model/series (TMS) aircraft VC-8 last bastion of active Naval TA-4J Skyhawks Fleet Composite Squadron EIGHT, Naval Air Station, Roosevelt Roads, Puerto Rico TA-4J Skyhawk jets & UH-3H Sea King helicopters. Several missions: Dissimilar Air Combat Training (DACT), Air Combat Maneuvers (ACM), Tactical Deception Units (TDU), Target tow/launch, Close Air Support (CAS), Electronic Warfare (EW), Search & Rescue (SAR), Torpedo & Drone Recovery, etc. N88 (Air Warfare Division) decided to retain VC-8 TA-4Js through FY-05 N8B & N80 requested NCCA independent cost assessment of alternatives for VC-8 tactical air services Background

Assumptions: 

Four alternatives… Only two viable alternatives... Replace TA-4Js with different TMS aircraft Utilize fleet self-provided services Retain VC-8 TA-4Js Commercialize services currently provided by VC-8 TA-4Js Qualified commercial services available for all missions currently performed by VC-8 TA-4Js VC-8’s rotary-wing component of six UH-3H Sea King helicopters & associated personnel would remain intact VC-8 TA-4J generated cost avoidance = [Manpower (MPN) + Operations & Support (OMN)] – [Contracted Air Services] Assumptions

VC-8 Annualized Cost(Direct Personnel Cost Only): 

VC-8 Annualized Cost (Direct Personnel Cost Only)

Manpower Questions: 

Manpower Questions …Is the “Cost Of VC-8 Manpower” only the direct costs associated with the possible elimination of 80 billets?…. …If we vary (eliminate or create) the number of “warrior” billets, does the number of “support” billets change in a predictable manner?….. Bottom line, can we develop Cost Estimating Relationships (CERs) between the historical changes (variable) in end strength among our “warriors” and “support” billet structure (indirect manpower)?….

Active Duty End Strength FYs 80-96: 

Active Duty End Strength FYs 80-96 Navy End Strength 1980 - 513,000 1989 - 593,000 1996 - 406,000 2000 - 366,633 Ships 1980 - 519 1989 - 586 1996 - 373 2000 - 315 Buildup Drawdown Data from OSD web site: http://web1.whs.osd.mil/mmid/military/ms8.pdf End Strengths

A Tale of Three Shirts…: 

A Tale of Three Shirts… Brown Shirts -”No” Support Personnel… E.g., OPNAV, SECNAV Green Shirts -Support Personnel… Acquire, Train, Locate & Support… E.g., Base Support, Medical, NRD Red Shirts -”Sea Duty” Personnel… I.e., Warriors attached to ships and squadrons…

Methodology FrameworkFY 96 Navy FYDP ExampleRepeat for FYs 80-95: 

Methodology Framework FY 96 Navy FYDP Example Repeat for FYs 80-95 Total FY 96 Manpower in the Navy: Off: 58,805 Enl: 365,195 1 - Strategic Forces 5 - Guard/Reserve 2 - General Purpose 10 - Other Nation Support 3 - C3I 11 - SOF 4 - Airlift/Sealift Programs 1 and 2 Support PEs 6 - R&D 7 - Supply and Maintenance 8 - Training, Medical and Other Pers Act 9 - Administrative and Associated Act Green Arrows Denote Support Provided

“707 Rule of Thumb”On Average, for Every Change of 100 “Sea Duty Billets” in End Strength...: 

70 “Support Sailors” and, 7 “Support Civilians”, Total Change of: 100 Sea Duty Sailors 70 Support Sailors 7 Support Civilians 177 Billets! (Bodies) “707 Rule of Thumb” On Average, for Every Change of 100 “Sea Duty Billets” in End Strength...

VC-8 TA-4J Related Manpower Pilots and Enlisted Billets For (6) TA-4Js : 

VC-8 TA-4J Related Manpower Pilots and Enlisted Billets For (6) TA-4Js Directs: Pilot Billets: 11 Enlisted Billets: 69 Total 80 pers MPN $3.5M Variable Indirects: Support (Mil) 55 Support (Civ) 15 MPN & ONM $3.2 M ONN* $0.3M Brown Shirts: 0 TOTAL Personnel-Related Quantities & Costs: Direct 80 Warriors $3.5M (MPN) Variable Indirect 70 Support $3.5M (MPN, ONM, ONNC*) “No” Support 0 0 Grand Total: 150 Personnel $7.0 M *ONNC: Other Non-Navy Cost, e.g., Defense Health Care Cost. Note: Montgomery GI Bill is a Direct ONNC.

Slide12: 

VC-8 Annualized Cost (Direct AND Variable Indirect Personnel Cost)

Quick Summary….: 

Quick Summary…. When you vary the number of Sea Billets (Warriors) (increase or decrease), the number of Support Personnel also vary in a predictable manner. Methodology applicable to ALL SERVICES… Model provides more realistic manpower cost estimates when end strength is changed…. Manpower-to-manpower analyses Manpower-to-machine analyses Organic-to-outsourcing analyses 707 Rule of Thumb: On average, for every change of 100 Sea Billets, there is a change of 70 Military and 7 Civilian Support billets.

COMET Website http://www.ncca.navy.mil/comet/index.html: 

COMET Website http://www.ncca.navy.mil/comet/index.html View The Entire COMET Variable Indirect Methodology At The Website

Want More Detail?…..: 

Want More Detail?….. ….. At this point, if there’s interest and we have more time I plan to go into greater detail…..

Cost Of VC-8 Manpower Direct Cost Methodologies: 

Cost Of VC-8 Manpower Direct Cost Methodologies Standard Programming Rate (SPR) One average cost for officer and enlisted Navy Composite Standard Rate (NCSR) One average cost for officer and enlisted, by pay grade Navy’s Cost Of Manpower Estimating Tool (COMET) “Granularized” costs for 32 officer communities and 118 enlisted ratings and management communities Actual DFAS-CL pay data supplied by the Defense Manpower Data Center (DMDC) Similar to the Army Military Costing System (AMCOS) model

Cost Of VC-8 Manpower FY99$ SPR Direct : 

Cost Of VC-8 Manpower FY99$ SPR Direct Officer Billet Costs 11 Billets X $83,390 Per Officer = $ 917,290 Enlisted Billet Costs 69 Billets X $37,219 Per Enlisted = $2,568,111 Cost Of VC-8 Manpower 80 Officer and Enlisted Billets = $3,485,401

Cost Of VC-8 Manpower  FY99$ NCSR Direct: 

Cost Of VC-8 Manpower FY99$ NCSR Direct

Cost OF VC-8 Manpower COMET FY99$ (Direct): 

Cost OF VC-8 Manpower COMET FY99$ (Direct) COMET rates developed from actual DFAS-CL/DMDC pay data

Cost Of VC-8 ManpowerDirect Cost Methodologies Compared : 

Cost Of VC-8 Manpower Direct Cost Methodologies Compared Standard Programming Rates 11 Officer Billets = $ 917,290 69 Enlisted Billets = $2,568,111 80 Billets = $3,485,401 NAVCOMPT Standard Rates 11 Officer Billets = $ 892,863 69 Enlisted Billets = $2,497,891 80 Billets = $3,390,754 COMET Direct Rates 11 Officer Pilot Billets = $ 847,664 69 Enlisted Billets = $2,638,744 80 Billets = $3,486,408

Variable Indirect Costs in VC-8 Assessment: 70 “Support” Billets, $3.5M in Manpower & O&S Costs…..: 

Variable Indirect Costs in VC-8 Assessment: 70 “Support” Billets, $3.5M in Manpower & O&S Costs….. MPN, OMN, ONNC

How The Methodology Works: 

How The Methodology Works Future Years Defense Plan (FYDP) Program Analysis All Volunteer Force (FYs 80-96/”Buildup” and “Drawdown”) Macro-level Program Element examination of support functions Data extracted from FYDP actuals and Windows Program Analyst’s Toolkit (WINPAT) Regression Analysis to determine CERs Methodology easily applicable to all Services Identify: FYDP Programs for “warriors”, “support” and “no-support” personnel Number of enlisted and officers in each category Amount of Support Operations & Maintenance, Navy (OMN) (Including Government Service (GS) Salaries and Contractor Fees) Use “partial adjustment” model to observe changes in “support” end-strength (E/S) one year after “warrior” E/S change Use regression analysis to determine CERs

Active Duty End Strength FYs 80-96: 

Active Duty End Strength FYs 80-96 Navy End Strength 1980 - 513,000 1989 - 593,000 1996 - 406,000 2000 - 366,633 Ships 1980 - 519 1989 - 586 1996 - 373 2000 - 315 Buildup Drawdown Data from OSD web site: http://web1.whs.osd.mil/mmid/military/ms8.pdf End Strengths

Methodology FrameworkFY 96 Navy FYDP ExampleRepeat for FYs 80-95: 

Methodology Framework FY 96 Navy FYDP Example Repeat for FYs 80-95 Total FY 96 Manpower in the Navy: Off: 58,805 Enl: 365,195 1 - Strategic Forces 5 - Guard/Reserve 2 - General Purpose 10 - Other Nation Support 3 - C3I 11 - SOF 4 - Airlift/Sealift Programs 1 and 2 Support PEs 6 - R&D 7 - Supply and Maintenance 8 - Training, Medical and Other Pers Act 9 - Administrative and Associated Act Green Arrows Denote Support Provided

Variable Indirect Costs Identify 63 “Support” Program Elements  (MPN and OMN) : 

Variable Indirect Costs Identify 63 “Support” Program Elements (MPN and OMN) Acquiring (or Recruiting): Advertising, Recruiting, Examining and Processing Costs Training: “General Skill Training” and Rating Specific/Community Training for either to get member to his/her first permanent duty station Locating: Individual’s Account (Students/Transients (Leave, Travel, Proceed, TEMDU), Patients, Prisoners and Holdees) Supporting: Medical (DoD subsidized and Navy), Base Operation Support and Administrative

Example Regression Results for Aviator Training  (FYs 81-96 Plotted) : 

Example Regression Results for Aviator Training (FYs 81-96 Plotted) 2500 3000 3500 4000 6000 8000 10000 12000 Flight Student, Instructors and Ground Training/Admin Officers “ “Fleet Seat” Operational Aviators Y X Y = 267 + .354 X

Variable Indirect Coefficients Coefficients Based On E/S Change Per 1000 : 

Variable Indirect Coefficients Coefficients Based On E/S Change Per 1000

Cost Of VC-8 Manpower All Navy Enlisted Average Costs: 

Cost Of VC-8 Manpower All Navy Enlisted Average Costs Pays and Allowances MGIB Pay and Allowances Military Support Billets GS Salaries Contractor Fees Defense Health Care

Cost Of VC-8 Manpower All Navy Officer Average vs Pilot Costs : 

Cost Of VC-8 Manpower All Navy Officer Average vs Pilot Costs Aviators’ Variable Indirect Cost Over $50K more than Average Officer

Real Cost Of VC-8 Manpower: 

Real Cost Of VC-8 Manpower 11 Officer Pilot Billets: $FY99 Support Billets Direct Cost $ 847,664 Military Support (Variable Indirect) $ 715,572 9 Billets Civilian Support (Variable Indirect) $ 420,662 5 Billets Defense Health (Other Non-Navy) $ 24,945 14 Billets 69 Enlisted Billets: Direct Cost $2,638,744 Military Support $1,756,326 46 Billets Civilian Support $ 383,985 10 Billets Defense Health $ 246,372 56 Billets Real Cost Of VC-8 Manpower $7,034,270… 150 Billets Total Direct $3,486,408 80 Billets Total Variable Indirect/ONN $3,547,862 70 Billets

Want More Information?: 

Want More Information?

Backup……: 

Backup……

Why Add These Extra Costs? ASN(RD&A) Direction: 

Why Add These Extra Costs? ASN(RD&A) Direction In his 19 Aug 97 memo to the Navy Acquisition Community, RADM Sullivan wrote: “The exclusion of (variable) indirect personnel costs has underestimated manpower costs and distorted the results of tradeoffs between personnel costs and investment in new technologies. It is important that we use more accurate personnel cost estimating rates for intra-Navy tradeoffs and analyses. I thus request that you employ COMET (direct and variable indirect values)...for all intra-Navy analytical purposes. Cost estimates forwarded to organizations outside the Navy should continue to use only direct manpower cost rates.”

Regression Analysis Basics: 

Regression Analysis Basics X Y Number and Category of Support Personnel or OMN ($M) F Number of Warriors Y = F + cX Observable Range