AMERICAS ARMY THE STRENGTH OF THE NATION CBA
AMERICA’S ARMY: THE STRENGTH OF THE NATION CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Cost-Benefit Analysis (CBA) Four-Day Training Briefing Step 1: Problem/Opportunity and Objective Version 3. 0 (Draft) Last Updated: 10 November 2011 Visit our CBA Website for more information regarding locations, signing up, upcoming training sessions, and more https: //cpp. army. mil 1
Key Learning Objectives CBA team members will: CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • Use tools and techniques to develop statements describing: – Problem/Opportunity – Objectives – Background 2
Step 1 Overview: Define Problem/Opportunity and Objective 1. Define Problem/Opportunity and Objective 2. Define Scope; Formulate Facts and Assumptions • • UNCLASSIFIED The Problem/Opportunity Statement: • The Objective: – 5. Identify Quantifiable and Non 1 Benefits Quantifiable 6. Define Alternative Selection Criteria CBA 4 -DAY TRAINING SLIDES – Provides the contextual information needed to understand the problem, need, or opportunity addressed in the CBA. – Defines unfulfilled customers’/stakeholders’ needs and expectations – Defines an opportunity to optimize/improve the performance of a product and/or service for the end user 3. Define Alternatives 4. Develop Cost Estimate for each Alternative The Background/Strategic Context • Describes the role of the CBA: what is the decision to be made, and how does the CBA inform and support it. What is the purpose of the analysis? Background: – Discusses the circumstances that describe a need for the CBA 7. Compare Alternatives 8. Report Results and Recommendations Key Questions: – – Does the Problem/Opportunity Statement provide a definition of the output performance issue/need? Does the objective meet the leadership’s needs? What major stakeholders are likely to be impacted? * Product(s) and/or service(s) are outputs with expected levels of performance (i. e. , levels of efficiency and effectiveness) from a customer/stakeholder. 3 When customer/stakeholder expectations are not met, then there is an issue/problem requiring an alternative/solution.
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Background/Strategic Context • “The background and circumstances define and assess the current state/condition. They provide the contextual information needed to fully understand the problem, need, or opportunity addressed in the Cost Benefit Analysis” (CBA Guide, “Step 1” https: //cpp. army. mil) 4
Background and Strategic Context CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • The problem/opportunity statement and objective should be accompanied by additional background information to help the reader understand various aspects of the problem – The context in which the problem exists – The guidance from senior leaders that establishes the importance of the requirement – The history of how the current situation came to exist • Background information should be substantial enough for all stakeholders to understand support the Problem/Opportunity Statement. 5
Background and the Status Quo CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • If the status quo isn’t considered a valid solution, the background information should explain why. Guideline: The status quo might not be a valid option if the required performance is not being achieved. For example: – If the CBA addresses a new requirement – one that is currently not being accomplished either well or poorly – there might not be a status quo. – If the CBA objective is to improve output to a level that far exceeds the current level, there might not be a status quo. In this case, the implicit decision has already been made to select a COA beyond the status quo. – If the status quo achieves the desired output but does so at a high cost, the status quo might not be considered a valid alternative. 6
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Problem/Opportunity Statements • “A problem statement clearly defines the problem, mission need, and required capability. When developing a problem or opportunity statement, the key is to state the problem or opportunity in terms of the organization’s mission that requires a solution to describe what the effort intends to accomplish. ” (CBA Guide, “Step 1”, https: //cpp. army. mil) 7
Problem/Opportunity Statement Key Questions CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Define the problem/opportunity succinctly in terms of Who, What, When, Where, and Extent. WHO § § § Who is experiencing the issue? Who will receive the benefits from an improved product or service? Specifically, who are the stakeholders/process owners? WHAT § § What required performance is not being achieved? What are the problems being addressed: defects, delays, rework, mistakes, etc. ? WHEN/HOW/ WHERE § § When, how, and where does the problem/opportunity occur? When did it begin? This could be as simple as “as long as we know”. EXTENT § What is the extent of the problem in terms of magnitude or trend (changes in magnitude)? The Problem/Opportunity Statement should include this information. 8
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Determining Unfulfilled needs Observations Problem/Opportunity I am always transferred to three or more different people Quality of Service: Sorting of incoming calls, assignment of the correct assistant to customer I’m getting my bill at different times of the month Delivery of Service: Lack of consistent standard for delivery date It takes too long to process the application Efficiency of Process: Loan Cycle Time 9
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Common Mistakes • Problem stated as predetermined solution instead of as problem, as in the form, “We need more money. ” • • Problem does not reflect the stakeholder concerns Problem is based on anecdotal information 10
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2. 5% per year for the past 8 years, while the inflation rate for the same period has remained constant at 3% per year. This fiscal year, the budget has been abruptly cut by 10% compared to the previous year. Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft. Hampton, which will soon be under repair and unavailable for use. Determine the correct problem statement. 11
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2. 5% per year for the past 8 years, while the inflation rate for the same period has remained constant at 3% per year. This fiscal year, the budget has been abruptly cut by 10% compared to the previous year. Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft. Hampton, which will soon be under repair and unavailable for use. Solution: Because the current storage facility at Ft. Hampton will soon be unavailable for use, the Army must determine the best way to store HMMWVs. 12
Problem/Opportunity Statement Exercises CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED 2) The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a major supply route. Determine the problem statement and objective. 13
Problem/Opportunity Statement Exercises CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED 2) The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a major supply route in Afghanistan. Determine the problem statement and objective. Solution: Problem statement—IEDs placed along major roads threaten the lives of coalition troops and the movement of critical supplies. Objective—to inform Commander, USCENTCOM decision on alternatives for IED clearance. 14
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Validate the CBA Problem/Opportunity Defining the problem/opportunity is the first step in developing a CBA; however, it is important to collaborate with CBA key players to ensure leadership agrees that the CBA addresses the decision. 15
Example - Stakeholders in the Army CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Typical Stakeholders by CBA Title Stakeholders “Detrick Earth Station Direct Communications Link In-sourcing Initiative” Dept. of State, White House Communications Agency, OSD, U. S. Northern Command “US Army Pacific G-2 X (CI/HUMINT)” U. S. Army Pacific Command, TRADOC, Intel Co. E, NETCOM “Reserve Components Soldier Medical Support Center” U. S. Army Reserve Command, G 1, OSD, Dept. of Veterans Affairs “Command Chief Warrant Officer Cost Benefit USAR, Operational & Functional Commands, Analysis” Expeditionary Sustainment Commands “Transition of the Combat Support Agency Command” Combat Support Agency Command, Military Intelligence Readiness Command “Stryker Cost Benefit Analysis” Army Capabilities Integration Center, FORSCOM, AMC, G 8 FD, ASA(ALT) 16
Objective Statement CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • The objective statement describes the role of the CBA: what is the decision to be made, and how does the CBA inform and support it? What is the purpose of the analysis? 17
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Objective Statement: Examples • “To inform Congressional decision on funding for winter storage of HMMWVs at Fort Benning. ” • “To inform senior leader decision on the allocation of DAC, contractor, and military labor to perform the physical security function at Camp Victory. ” 18
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED 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 FY 1896 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. Determine the correct problem/opportunity statement and objective. 19
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED 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 FY 1896 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. Determine the correct problem/opportunity statement and objective. Solution: Problem statement—the next phase of Ford’s R&D process cannot proceed without a drivable car. Objective—to inform Ford’s decision on how to obtain a car for test-driving. 20
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