AMERICAS ARMY THE STRENGTH OF THE NATION CostBenefit
AMERICA’S ARMY: THE STRENGTH OF THE NATION Cost-Benefit Analysis (CBA) Four-Day Training Briefing CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Step 5: Benefits 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 4 -DAY TRAINING SLIDES UNCLASSIFIED Objectives: • Understand the nature of benefits • Understand the types of benefits • Quantitative vs. non-quantitative • Objective vs. subjective • Recognize what constitutes a well-crafted benefit 2
Step 5: Benefits 1. Define Problem/Opportunity and Objective 2. Define Scope; Formulate Facts and Assumptions CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED 3. Define Alternatives 4. Develop Cost Estimate for Each Alternative 5. Identify Benefits 6. Define Alternative Selection Criteria 7. Compare Alternatives 8. Report Results and Recommendations 3
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Definition: Benefit • “Benefits of a chosen alternative are results expected in return for costs incurred. They are the quantitative and qualitative results expected or resulting from the implementation of a project/initiative (which may include but are not limited to the following: equipment, facilities, hardware, systems, etc. ). ” (CBA guide, “Step 5”) 4
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Primary Benefits • In the CBA, the most important benefits to include for each COA are the primary benefits: the benefits most relevant to the objective being sought. • Primary benefits should answer the question, “How does this COA serve as a solution to the stated problem? ” Problem Statement COA description Primary benefit of COA Product manufacturing time exceeds the limit specified by mission requirement by 15% Expand manufacturing facility and personnel by 20% Product manufacturing time expected to be reduced to 10% under mission requirement limit Current residential facilities insufficient to accommodate influx of 400 new soldiers due to upcoming BRAC Move 400 civilians currently living in temporary on-base quarters to off-base housing. COA will vacate living quarters for the 400 new soldiers expected on base. 5
Secondary Benefits CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • When most or all of the COAs under consideration have nearly identical primary benefits then it will be necessary to consider and include Secondary benefits answer the question, “How well does the COA solve the problem? ” – Secondary benefits can include: reliability, feasibility, amount of training required, ease of acquisition, time required for implementation, and other “perks” like resale or reuse value. • Secondary benefits receive less weight than primary benefits, but they may be used to distinguish between COAs that provide similar primary benefits. 6
Identifying Benefits UNCLASSIFIED When identifying benefits, consider the following: 1. The CBA problem statement (from Step 1) usually states or implies a desired benefit (the primary benefit). Ask the question: How well does this COA achieve the benefit implied in the problem statement? • CBA problem statement: Identify the optimum process to achieve timely, error-free submission of personnel performance appraisals. CBA 4 -DAY TRAINING SLIDES – The clearly stated benefits or metrics are (a) timely submission and (b) errorfree submission. 2. If a COA appears to deliver relevant benefits that are not encompassed by the problem statement, perhaps analysis should be modified. 3. Are the benefits objective, and can they be quantified? 7
Types of Benefits • Quantifiable vs. difficult to quantify – Quantifiable benefits can be measured CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • Objective vs. subjective – Objective benefits are matters of fact – Subjective benefits are matters of opinion • Note that difficult to quantify is not the same as subjective. – Some subjective benefits can be quantified 8
Types of Benefits (cont’d) • The table indicates the possible array of benefits, with examples in each cell CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Quantifiable Difficult to Quantify Subjective Customer satisfaction Morality Flexibility Adherence to policy Life, safety, health Objective Order-ship time Cycle time Error rate Vehicle speed Weapon survivability N/A – All objective benefits can be measured, usually with a number or sometimes with a yes/no indicator. 9
Desired Characteristics of Benefits CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • Benefits should be – – – Relevant Reasonable Specific Logical Clear • Try to identify benefits driving the decision § Objective benefits facilitate the decision-making process, because they help to remove opinions and emotion from the discussion. They build the strongest case for the preferred COA. § Overstatement of benefits is the primary source of bias in CBAs. It is difficult to overstate objective benefits. 10
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Well-Crafted Benefits 11
Benefits Best Practices CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Problem Statement: “We need a more user -friendly IT ARFORGEN tracking system. ” Benefits should be CLEAR. • Bad: – COA 1 improves ARFORGEN greatly (or color code green). • Good: – The improved system in COA 1 has 20% fewer required user inputs, an easier to read interface, and reduces the expected training/orientation time by 2 hours per user. 12
Benefits Best Practices (Cont’d) UNCLASSIFIED Problem Statement: “We need to achieve satisfactory levels of proficiency in job related tasks. ” Benefits should be SPECIFIC. • Bad: – Alternative 1 increases Doctrinal Currency, Soldiers trained and current in their duties. CBA 4 -DAY TRAINING SLIDES • Good: – Alternative 1 provides a trainer-student ratio of 1: 10. This will enable trainers to spend more time with each student and help them achieve the desired degree of proficiency. 13
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Benefits Best Practices (Cont’d) Problem Statement: “We need an extremely mobile weapon platform that can provide indirect fire support to assist in ground operations. ” Benefits should be RELEVANT. • Bad: – COA 1 provides clear communications between infantry and armor units. • Good: – The addition of an auto-loading 120 mm mortar in COA 1 allows the Main Battle Tank to fire beyond the line of sight, increasing the current range by 5, 000 feet. This will enable an armor company to provide the indirect fire capability comparable to 3 infantry heavy mortar platoons, and with no measurable reduction in mobility. 14
CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Summary • In identifying benefits, address one COA at a time … comparison comes later. • Benefits can be financial or operational / functional. • Objective benefits remove emotion and bias from the decisionmaking process. • Develop benefits that are – – – Relevant Reasonable Specific Logical Clear 15
Exercises CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED Problem Statement: “Need to transport 4, 000 lbs. of medical supplies from one bank of the Amazon River to another within 96 hours to support an Army humanitarian mission in Brazil. ” For the following COAs, what metrics would enable a good comparison of benefits and/or risks? : 1. Build a permanent steel bridge across the Amazon. 2. Build a collapsible aluminum bridge across the Amazon. 3. Ford the river. 4. Use makeshift rafts to float supplies across. 5. Turn around and head back to Sao Paulo, and charter a plane across the Amazon. 16
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. 17
Review Exercise: Henry Ford CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED • Identify primary and secondary benefits for each of the following Courses of Action: – COA 1 (Status Quo): Leave the car in the garage, do nothing else. – COA 2: Disassemble the car and reassemble it outside the garage. – COA 3: Obtain permission of garage landlord to widen the garage door. 18
Mini-case Exercise #5 CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED or “how many can I get for $1. 2 B? ” • The Chief of Staff, Army has apportioned $1. 2 B for the procurement of customized “Longbow Apache 2” helicopters and “Abrams 2” tanks in support of the troop surge in Iraq. Each customized Apache helicopter may be purchased at a flat rate of $60 M each. Due to increasing marginal costs of production, the price for the Abrams tank is semi-variable. The first 24 tanks produced can be purchased at a rate of $10 M each; the next 40 tanks can be procured at a rate of $12 M each; every subsequent tank purchased beyond these first 64 will cost $15 M each. [Note: Fictional] 19
Mini-case Exercise #6 CBA 4 -DAY TRAINING SLIDES UNCLASSIFIED or “where do the lines cross? ” • U. S. Army Central Command has secured $118 M 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 $5 M each and weighs 27, 000 pounds. The class X HIMARS 2 costs $7 M and weighs 12, 000 pounds. The class X model is produced using a rare metal: no more than 14 may be procured. After procurement, all the HIMARS 2 will be transported to Afghanistan by a fleet of ten C-130 Hercules aircraft. The total weight constraint is 405, 000 pounds. 20
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