DoD Joint Weapons System Product Support Business Case Analysis Example

Product Support BCA Template: Giuntini & Company, Inc.
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MS C Review
Product Support BCA Study Type II
for the
XYZ
Joint Weapon System Program

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Table Of Contents
1. Executive Summary
2. Introduction
a. Problem Statement
b. Background
c. Scope
3. Desired Outcomes and Requirements
a. Desired Outcomes
b. Requirements
4. Assumptions and Methods
a. Ground Rules and Assumptions
i. Cost Drivers
ii. Affordability Enablers
b. Analysis Methods, Tools, and Rationale
c. Evaluation Criteria
5. Alternatives
a. Current Baseline/Anticipated Initial Support/Status Quo
b. Alternatives Reviewed
6. Mission and Business Impacts
a. Jointness Elements
b. Benefits and Non-Financial Analysis
c. Cost and Financial Analysis
7. Risk Analysis and Mitigation Plans
a. Risk Analysis
b. Mitigation Plans
8. Sensitivity Analysis
9. Conclusion
a. Selection of Preferred Alternatives
b. Financial Summary of Results

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10.Recommendations
a. Specific Actions Based on Business Objectives
b. Implementation Plan
11.Open Items
12.Appendix
a. Quantities/Locations: Tables and Map
b. Alternative Business Model Elements Selected For Each PSE Solution
c. Financial Analysis
d. Acronyms
e. Glossary of Terms
f. Bibliography
g. BCA JIPT Charter
h. PSI Selection Questionnaire
i. Overview of Hypatia
j. Hypatia tool; all cost calculations (in MS Excel workbook)
k. IPT member’s BCA study comments and author responses
l. Schematic of Product Support life cycle stages

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1. Executive Summary
The core functionality of the XYZ Acquisition Category [ACAT] XX weapon system-of-record is
to provide the means for performing AAA activities. The following 5 end-user organizations, not
all employing the same system configuration, will be fielding an estimated 445 end-items, over
280 CONUS and OCONUS sites during a six year period beginning in 20XX, with the last fielded
end-item retired in 20XX:
1. Org1.
2. Org2.
3. Org3.
4. Org4.
5. Org5.
This Product Support Business Case Analysis [BCA] Type II study is to be employed in
the Milestone C [MS C] weapon system acquisition review by the XYZ Project Office of
the ZZZ Program Office of the WWW Joint Program Executive Office [JPEO] of the RRR
Life Cycle Management Command [LCMC].
The primary output of this Product Support BCA study is to recommend to Program
Management leadership a Product Support Enterprise [PSE] construct that provides the
best value for efficiently and effectively managing the Product Support processes
employed during the in-service life and End-Of-Life [EOL] of the XYZ weapon system.
Note that the XYZ system PSE is a virtual organization that is configured to deliver
specific solutions that achieve the objectives of: Materiel Availability [Am] (80% as
stated in the CDD), affordability (cost per end-item per period) and “jointness”.
This study’s construct follows that of the DoD Product Support BCA Guidebook and the
Defense Acquisition Guidebook. Emphasis on: simplicity, integrated approaches,

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assured continuity of resources, low logistics burden, flexibility and maintaining
interoperability with technologies outside of the XYZ system were also considered.
As a result of attempting to optimize the PSE construct, not all the end-user
organizations will be satisfied with the recommendations of this Product Support BCA
study; it will be up to end-user leadership, working with the PM Office, to develop a
consensus as to the required adjustments to the recommendations of this study.
Note that this Product Support BCA is one of few studies of its kind to ever be delivered
for a joint weapon system-of-record that includes five end-user organizations.
A Product Support BCA Type II study Integrated Project Team [IPT] was established to
provide inputs to this initiative. Product Support functional Subject Matter Experts
[SMEs] from all the end-user organizations were in attendance at the eight IPT
meetings that took place over a one year period. Inputs from the IPT were included in
this study; most were obtained during the eight IPT sessions.
The following Product Support processes were employed when crafting the construct of
the PSE:
• Processes performed in the field: (1) Correct item failure; driven by
reliability issues, (2) Replace item shrinkage; driven by the many items that
will be handled, misplaced and incorrectly reported during missions (3)
Correct minor damage; driven by CONOPS/OPTEMPO (4) Calibrate/test item;
driven by safety and reliability issues (5) Replace use-driven items; generated
by mission OPTEMO that drives wear and tear.
• Processes performed at a sustainment site: (1) Modify system; driven
by DMSMS and reliability issues, with no capability-driven modifications
included (2) Repair catastrophic damage to system (3) Reconstitute/reset
system; driven by deployments (4) Store/pre-position system short/long-term

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(5) repair/renew reparable parts.
Note that sustainment sites can be either Government or Contractor.
• Processes performed at End Of Life: (1) retire/store/preserve tooling (2)
dispose.
• Processes performed for system management (within PSM/PSI
Office): (1) performance oversight (2) PSE configuration (3) Test &
Evaluation (4) Quality Control (5) Logistics/Technical.
The BCA cost analytics employed an activity-based target-costing technique that
calculated the various Product Support costs that are to be incurred during each period
of the life cycle of the PSE; from the first end-item fielding to the last end-item being
disposed. Activity-based cost analysis was performed regardless of the funding source.
This approach is aligned with that of the Cost As-an Independent Variable [CAIV]
concept in the Defense Acquisition Guidebook. The following cost drivers were the
primary inputs to establishing the targeted cost: (1) Each end-user’s CONOPS (2) Each
end-user’s unique Bill Of Material [BOM] (3) Applicable Product Support processes for
each end-user (4) Frequency and duration of each Product Support process (5)
OPTEMPO/mission (6) Item design source; COTS, GOTS and Developmental (7) KPP
levels required (8) Period in which fielding occurs (9) Period of time that end-items will
be in-service (10) Product technology volatility (11) Congressional mandates/FAR (12)
Industrial base sources (13) Tech Data Package [TDP] ownership.
The PM Office has chosen to follow the guidelines of a Product Support Enterprise [PSE]
construct; reflected in the OSD Product Support Manager Guidebook. Note that XYZ, as
an ACAT XX weapon system, is not required by DoD doctrine to employ the PSE
concept. The PSE construct is the primary enabler in achieving the estimated 19% life
cycle cost reduction assumed in the BCA. These savings are driven by employing the

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existing commercial industrial base, mitigating DMSMS risks, employing joint initiatives
on indirect costs and other efforts.
Multiple alternatives to each business model employed for each solution were reviewed.
Multiple scenarios were performed for each of the alternatives in order to optimize Am,
affordability, jointness and risk mitigation. The business element alternatives reviewed
included supply chain transaction types, parts ownership, organic versus contractor
depots, joint versus end-user organization specific distribution centers and many other
alternatives. As a result of the selection of the preferred alternatives, the estimated PSE
life cycle targeted costs below were derived for each of the end-user organizations
employing the XYZ system.
Organization
XYZ System Annual Product Support Targeted Expenditures (2012 $millions)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 TOC
Org1 total $0.5 $1.6 $3.0 $4.7 $6.7 $8.0 $8.3 $35.4 $7.9 $7.7 $13.7 $6.4 $25.5 $4.1 $2.3 $0.8 $136.7
# end-items 11 39 73 117 168 206 216 216 216 216 206 185 159 117 60 14
per end-
item
$0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.16 $0.04 $0.04 $0.07 $0.03 $0.16 $0.03 $0.04 $0.06 $0.06
Org2 total $0.4 $1.9 $3.7 $5.2 $6.6 $7.6 $7.6 $14.7 $7.2 $7.0 $8.2 $5.2 $7.6 $2.3 $1.0 $0.2 $86.4
# end-items 3 13 26 37 48 56 57 57 57 57 54 44 31 20 9 1
per end-
item
$0.14 $0.15 $0.14 $0.14 $0.14 $0.14 $0.13 $0.26 $0.13 $0.12 $0.15 $0.12 $0.24 $0.11 $0.11 $0.13 $0.15
Org3 total $0.0 $0.4 $1.1 $1.8 $2.2 $2.1 $2.1 $4.9 $2.0 $1.9 $2.6 $1.6 $2.4 $0.3 $0.0 $0.0 $25.4
# end-items 0 3 9 15 18 18 18 18 18 18 18 15 9 3 0 0
per end-
item
$0.00 $0.00 $0.12 $0.12 $0.12 $0.12 $0.12 $0.27 $0.11 $0.11 $0.14 $0.00 $0.00 $0.00 $0.00 $0.00 $0.14
Org4 total $0.0 $0.0 $0.0 $0.3 $1.0 $1.5 $1.8 $10.6 $1.7 $1.6 $4.0 $1.6 $10.3 $1.3 $0.8 $0.4 $36.8
# end-items 0 0 0 25 75 122 143 143 143 143 143 143 143 118 68 21
per end-
item
$0.00 $0.00 $0.00 $0.01 $0.01 $0.01 $0.01 $0.07 $0.01 $0.01 $0.03 $0.01 $0.07 $0.01 $0.01 $0.02 $0.03
Org 5 total $0.1 $0.2 $0.2 $0.2 $0.2 $0.2 $0.2 $1.6 $0.2 $0.2 $0.3 $0.0 $0.0 $0.0 $0.0 $0.0 $3.7
# end-items 6 11 11 11 11 11 11 11 11 11 6 0 0 0 0 0
per end-
item
$0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.14 $0.02 $0.02 $0.05 $0.00 $0.00 $0.00 $0.00 $0.00 $0.03
Total $1.0 $4.1 $8.0 $12.3 $16.7 $19.5 $20.0 $67.2 $19.0 $18.5 $28.8 $14.7 $45.9 $7.9 $4.1 $1.4 $289.1
# end-items 20 65 119 205 321 412 445 445 445 445 426 387 342 258 136 37
per end-
item
$0.06 $0.08 $0.09 $0.07 $0.06 $0.05 $0.05 $0.17 $0.05 $0.05 $0.08 $0.04 $0.15 $0.03 $0.03 $0.04 $0.06
*Note: cost spikes in table are modification driven

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The recommended PSE construct is to manage an estimated 78% of the life cycle
targeted costs through a Joint Product Support Provider [JPSP]; focused upon selective
item support. The JPSP would have three Product Support hubs in CONUS and 2 hubs
in OCONUS. The remainder of the 22% of life cycle costs would be managed by each
end-user organization, as well as the Product Support Integrator [PSI] Office. The JPSP
would also deliver solutions, on a case-by-case basis, to complement the individual
efforts of the end-user organizations. Note that all recommended alternatives were
provided with a cost target; the PM Office and the Organizations should not request
funding that surpasses the targeted costs.
The recommendations of this study drive the Life Cycle Sustainment Plan [LCSP]; a
report delivered by the Product Support Manager [PSM] to the Program Manager at the
MS C review.
Upon the approval of the LCSP, the implementation period of the PSE for the XYZ
system will be an estimated 12-18 months. The first tasks to be performed are the
establishment of both the JPSP described above and the PSI Office. During this period,
each end-user organization will begin the integration of XYZ system requirements into
their current logistics operations for non-jointly managed items.

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2. Introduction
2a. Problem Statement
The XYZ Program Office requires a majority of life cycle Product Support solutions to be
jointly delivered and at the same time assure that all the Product Support processes
employed during the In-Service life and End-Of-Life of the weapon system achieve
Materiel Availability [Am] and targeted cost objectives.
2b. Background
The XYZ program is a weapon system-of-record that is primarily configured as a
Commercial Off The Shelf [COTS] end-item that provides the warfighter with a AAA
capability. As stated in the Buying Commercial: Gaining the Cost/ Schedule Benefits for
Defense Systems, Report of the Defense Science Board Task Force on Integrating
Commercial Systems into the DOD, Effectively and Efficiently. February 2009, Office of
the Undersecretary of Defense for Acquisition, Technology and Logistics [OUSD
(AT&L)], "In the 21st century, adversaries of the United States can and do buy
advanced commercial systems. DOD therefore, must find ways to accommodate these
commercial practices to maintain a technological edge." This will hold true both for the
acquisition of COTS items, as well as the management of their Product Support.
The core functionality of the XYZ weapon system is to provide the means for
performing BBB activities. The system has the following attributes:
• Modular packaging of equipment.
• Ability to transport the mission gear effectively.
• Mission durations of up to xx hours.
• Allows for transportation worldwide by air lift, external lift and landing craft.
• Others

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The XYZ system is currently to be fielded with five system configurations in order to
meet the specific requirements of five end-user organizaitons.
A Product Support BCA Type I study for “MS B” review was delivered in May 20xx to the
PM Office. As a result of extensive changes to the system configuration, changes to the
units to be delivered and many other factors, including the change in the name of the
weapon system, a minority of the Type I BCA study was applied to the Type II BCA
study.
A Product Support BCA IPT [IPT] was established in order to optimize the
inputs/outputs of the BCA study. There were eight 1-2 day meetings in which a variety
of issues were addressed. The IPT participants represented the following end-user
organizations:
• XYZ Joint Program Manager [JPM] Office.
• JPEO ZZZ Enterprise Logistics Initiative [ELI] team.
• Test Center.
• Contractor.
• Org1 Material Developer.
• Org2 Project office.
• Org3 LCMC.
• Org2 Combat Developer.
• Org1 LCMC.
• Org5 Sustainment Directorate.
• Defense Logistics Agency [DLA].
• Others.
The key accomplishments of the BCA IPT were the following:
 Establishment of an IPT charter; commitment by the end-user organizations to
the success of the construct of the Product Support Enterprise [PSE] alternatives

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were discussed. See Appendix-g for details of charter.
 Engagement of the Joint Program Executive Office [JPEO] ZZZ Enterprise
Logistics Initiative [ELI] team; assisted the IPT in identifying PSE alternatives
that could be both effective, affordable and within Governmental regulations.
 Development of a common terminology when discussing Product Support
concepts across all end-user organizations; a major challenge due to the
different Concept Of Operations [CONOPS] of each end-user.
 Focus on the impact upon Total Ownership Cost [TOC] when setting Product
Support Strategy [PSS] priorities; improved effectiveness of IPT in setting the
focus of discussions on what is important on a strategic level.
 Robust review of the Materiel Availability [Am] Key Performance Parameter
[KPP], at Location A on X NOV 20X, in order to develop better clarity of the
inputs required for populating the metric; one of the major drivers for the
quantity of indirect resources employed in a PSE.
 Recognition that the source of funding for the execution of PSE alternatives is
critical; without this area being addressed, through the flow of Operation &
Sustainment/Maintenance [O&S/M] or acquisition budgeting/POM funding, an
“out-of-the-box” construct of a PSE alternative is of little value.
 Recognition that due to the employment of COTS items in the configuration of
XYZ system, many Diminishing Manufacturing Sources/Materiel Shortages
[DMS/MS], End-Of-Life [EOL] and tech refresh process challenges will occur; it is
estimated that during the 16-year life of this system in DoD inventory, 2-3 tech
refresh modification processes will be employed on the system.

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As stated in the previously cited OUSD (AT&L) Buying Commercial report, "A
primary advantage of using many commercial items is access to a commercially
driven maintenance infrastructure. A corresponding disadvantage is that the
products overseen by commercial suppliers do not remain constant over the life
of a typical defense system, owing to the need for commercial suppliers to keep
advancing the capability and/or efficiency of their product in order to stay ahead
of competitors."
 The IPT was briefed by the author of this study, based upon his 37 years of
commercial and military Product Support experience, that without an aggressive
Product Support parts Supply Chain Management [SCM] initiative, the Am and
affordability of this weapon system would deteriorate within 6 months after the
beginning of fielding. This weapon system is a set of products bundled to deliver
a solution, rather than one assembled product, as in an aircraft; lots of “stuff can
happen” in keeping all these “moving pieces” together as one weapon system.
 Reliability issues, usually a major Product Support cost driver, were recognized
as not being material in impacting TOC.
The 8 IPT working sessions in XX, USA took place on:
1. X August 20XX.
2. X September 20XX.
3. X October 20XX.
4. X November 20XX.
5. X December 20XX.
6. X January 20XX.
7. X April 20XX.
8. X June and X July 20XX.

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A PM Office Leadership status review session took place in XX, USA on X December
20XX with LTC XXX.
A Materiel Availability review session took place in XX, USA on X November 20XX.
A review of the Product Support, life cycle, activity based, target cost estimating tool,
Hypatia©, employed in the BCA, took place in XX, USA on X October 20XX.
The first rough draft of the BCA study was delivered on X March 20XX. Several re-writes
were performed over a five month period, based upon formal and informal IPT inputs.
The inputs from the IPT, as much as possible, were included in this study. Note that the
leadership from each end-user organization employing the XYZ system will have the
final word as to the acceptance of the conclusions and recommendations of this study.
2c. Scope
This Product Support Business Case Analysis [BCA] study is to be employed by the
Program Manager [PM] Office of the XXX Joint Program Executive Office [JPEO] of the
XXX Life Cycle Management Command [LCMC] in their Milestone C [MS C] System
Acquisition review for the XYZ weapon system. This Product Support BCA study has
employed a disciplined and previously applied methodology for recommending the
preferred Product Support Strategy [PSS].
The Product Support BCA may be somewhat different from other decision support
analyses through its emphasis of the enterprise-wide perspective of Product Support
stakeholders and decision makers. Other studies that encompass some of the attributes
of a BCA are: Economic Analysis, Cost-Benefit Analysis, and Should-Cost Analysis.
This Product Support BCA provides the findings and the resulting conclusions that drive
the recommended actions to achieve stated Program Manager Office objectives and

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desired outcomes. The Product Support BCA output is a major input to the Life Cycle
Sustainment Plan [LCSP].
This Product Support BCA does not replace the judgment of the decision making of
Leadership; it provides an analytic, standardized, and objective foundation upon which
credible decisions can be made. This Product Support BCA is a comprehensive and
accurate effort at selecting the preferred alternative of the many elements that are
employed in delivering a balance between Am and affordability; there is a recognition
that a common tension between process efficiency and effectiveness exists among the
stakeholders in a Product Support Enterprise.
This Product Support BCA incorporates background research, due diligence,
governance, and data management; these initiatives assure the output of a quality
study that can meet the rigorous requirements of the “MS C” review. The ultimate focus
of the Product Support BCA is to accurately portray the future operationally and
financially state of the PSE.

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3. Desired Outcomes And Requirements
3a. Desired Outcomes
Establish a PSE construct, a virtual organization, to be employed in managing field and
sustainment maintenance activities throughout the in-service life of the XYZ weapon
system, as well as the management of its End-Of-Life [EOL]. The Product Support BCA
study recommendation balances the following four objectives of a PSE:
1. Achieve a required level of system Materiel Availability [Am].
2. Establish an affordable target cost in achieving system Am.
3. Deliver an optimal number of solutions that employ “jointness.”
4. Mitigate the risks of the PSE delivering unfavorable Am or affordability results.
Display 3a-1 is a schematic of this desired outcome.
Display 3a-1

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A schematic of the weapon system life cycle and where the PSE fits in the overall
picture is displayed in Appendix 12:i.
The Product Support life cycle cost is typically the largest cost element of Total
Ownership Cost [TOC]. For the XYZ system, Product Support will drive the plurality of
TOC. Below in Display 3a-2 is a general distribution of TOC elements; derived from DoD
data sources. XYZ system Product Support life cycle costs will be more than the average
DoD weapon system.
Display 3a-2
The owner of the Product Support BCA study was directed by the PM Office leadership
to employ a joint-focused approach as the preferred Product Support Strategy [PSS]. It
was the belief of the PM Office leadership that Product Support “jointness” would result
in greater affordability due to the following:
• Less safety/insurance stock for Product Support parts;
the less the number of stocking points for each end-user organization, the
lower the demand forecasting inaccuracies, and the lower the inventory
investment to meet Am.

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• Less DMSMS driven obsolescence costs;
tighter centralized configuration control will improve effectiveness and
efficiency in product modification phase-out/phase-in activities.
• Less indirect costs due to economies of scale when each end-user
organization is not employing their own;
o Facilities
o Personnel
o Equipment
o IT infrastructure
o Other
3b. Requirements
The Capability Development Document [CDD] for the XYZ system had only one
reference to any Product Support requirements; a minimum 80% Materiel Availability
[Am]. No further Product Support Key Performance Parameters [KPPs] were employed
in the CDD, such as level of “jointness” and cost-per-fielded-end-item-per-year. Nor was
there any numerator, or denominator detailed in the Am. As a result, a one-day session,
at the PM Office in XXX, USA, on X November 20XX was organized in order to define in
detail the calculation of the 80% Am.
The Am calculation factors, resulting from the above meeting, were defined as the
following:
• Denominator= average number of deployable and non-deployable fielded units,
at month-end, during a rolling twelve month period.
• Numerator=average number of deployable and non-deployable fielded units at
month-end, during a rolling twelve month period, which were classified as
available to perform their mission.
• Table (Display 3b-1) below provides an example of the calculation.
Display 3b-1

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Fielded
End-
Items
Month 12
Mth.
Avg.1 2 3 4 5 6 7 8 9 10 11 12
#
Available
421 393 411 439 407 316 429 422 398 408 446 435 410
Total # 450 450 450 450 450 450 450 450 450 450 450 450 450
Period
Am
94% 87% 91% 98% 90% 70% 95% 94% 88% 91% 99% 97% 91%
Note that on a month by month basis large variations in Am can occur, for example a
modification program could temporarily remove many end-items from the field while
they are upgraded at a depot.
The PM Office, working with an independent analysis organization delivered a study
addressing the Am of the XYZ system; they concluded that due to high reliability,
redundancy of products within the XYZ system and the planned OPTEMPO of end-
users, actual Am levels of over 90% will most likely be achieved.
This Product Support BCA study has attempted to conform to the “Chairman of the Joint
Chiefs of Staff Instruction (CJCSI) 3170.01F.” This memorandum implemented a
mandatory Product Support Key Performance Parameter (KPP) Materiel Availability
[Am], along with two mandatory Product Support Key System Attributes (KSAs):
Materiel Reliability and Ownership Cost. These metrics, along with Mean Downtime,
aligned recent Joint Staff actions and established a single set of Product Support
metrics throughout a program’s life cycle. Goals for these four outcomes should be
established early in the concept decision process, refined throughout the design
development process, and then carried through as program baseline goals until system
retirement. Status towards these goals should be reported at Program Reviews.”
Note that KSAs have yet to be defined by the PM Office, but attempts have been made
in this study to estimate what the KSAs would have to be in order to meet Am.

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4. Assumptions and Methods
4a:i Ground Rules and Assumptions: Cost Drivers
The following elements were applied:
1. The assumed number of units to be fielded by each end-user organization, by
their deployability and their locations are listed in Display 4a:i-1; this was
provided by the PM Office and the end-user organizations. Note that this
assumption has had a number of changes over the last six months, and continues
to evolve.
Display 4a:i-1
# of End-items Per Service Per Location & # of End-Item Sites
Org Segment
Deployable End-
Items
Non-Deployable
End-Items
L-T
Storage
End-
Items
End-Item Totals
All
CONUS OCONUS CONUS OCONUS CONUS CONUS OCONUS
Org1 Active 111 11 8 0 0 119 11 130
Org1 Non-Active 85 1 0 0 0 85 1 86
Org2 Active 54 3 0 0 0 54 3 57
Org3 Active 12 4 0 0 0 12 4 16
Org3 Non-Active 0 0 2 0 0 2 0 2
Org4 Active 20 10 62 28 0 82 38 120
Org4 Non-Active 0 0 23 0 0 23 0 23
Org5 Active 7 0 4 0 0 11 0 11
Total End-Item
Quantity
289 29 99 28 0 388 57 445
445 Fielded Units
∼280 Global Sites

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# of End-items Per Service Per Location & # of End-Item Sites
Org Segment
Deployable End-
Items
Non-Deployable
End-Items
L-T
Storage
End-
Items
End-Item Totals
All
CONUS OCONUS CONUS OCONUS CONUS CONUS OCONUS
Total Sites of End-
Items
210 37 33 0 0 243 37 280
Deployability Status
Planned % of
Delivered End-
Items
Deployable 71%
Non-Deployable 29%
Spares 0%
Total 100%
Note that the XYZ system will be one of the most geographically dispersed systems in
the DoD inventory.
A “deployable end-item” connotes that an end-item is assigned to an end-user that will
be able to employ the end-item in the case of a mission event. Each end-user
organization has different terms for “deployable;” for this study this term will be
employed for all the end-user organizations.
2. The assumed 6 year end-item fielding schedule and 6 year end-item retirement
schedule is provided in Display 4a:i-2; a very preliminary information data set was
provided by the PM Office. Note that this fielding schedule could be changed
significantly in the future.
Display 4a:i-2
Organization
End-Items In-Service (period average rounded)
Production/Fielding Stage Fully Fielded Stage Retirement Stage
20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX
Org1 11 39 73 117 168 206 216 216 216 216 206 185 159 117 60 14
Org2 3 13 26 37 48 56 57 57 57 57 54 44 31 20 9 1

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Organization
End-Items In-Service (period average rounded)
Production/Fielding Stage Fully Fielded Stage Retirement Stage
20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX 20XX
Org3 0 3 9 15 18 18 18 18 18 18 18 15 9 3 0 0
Org4 0 0 0 25 75 122 143 143 143 143 143 143 143 118 68 21
Org5 6 11 11 11 11 11 11 11 11 11 6 0 0 0 0 0
Total 20 65 119 205 321 412 445 445 445 445 426 387 342 258 136 37
3. The assumed life of a deployable fielded end-item is 10 years; provided by PM
Office. Note that fielding and retirement quantities are not a mirror image due to
average beginning and ending periods employed for computations. Non-
deployable end-items will remain in inventory until the EOL of the system; as a
result some end-items will be in inventory as long as 16 years.
4. The assumed deployability status of the end-items is derived from the following:
• Service provided counts for deployable (i.e. garrison training) and non-
deployable (i.e. school house) fielded end-items.
• Deployed units, for military or humanitarian events, were estimated as a
percentage of deployable units; an average of 3-5% of deployable units will
be deployed during any one year. Note that there is no differentiation for
supplemental or O&S/M funding sources.
• No end-user organization has identified its intention of acquiring end-items
for long-term storage; currently no end-items are populating the analytic tool.
5. The following 5 Bill Of Material [BOM] variants were applied throughout the
analysis. The BOMs identified which items were employed in each system
configuration, as well as the quantity of each item. For example. Part Number
ABC was included in the Org1 end-item, but not in the Org2 end-item, and there
is a quantity of 4 for Part Number ABC in each of the Org1 end-items :
• BOM Variant #1: Org1.

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Display 4a:i-3 provides an overview of the different BOM for each end-user
organization employing the XYZ system. Note that the BOMs have had many
changes, with potential future changes still being considered.
Display 4a:i-3
BOM
XYZ System Capability
Key Item Qty Per
Organization
Employing Capability
Description Key Item
Org1
Org2
Org3
Org4
Org5
Sensors/ Meters
A a 1 1 0 0 1
B b 2 2 0 2 2
C c 2 0 0 2 2
D d 6 15 0 6 1
E e 2 2 0 2 4
F f 1 4 0 0 2
G g 4 6 4 6 4
H h 5 5 5 5 5
I i 1 2 1 1 1
J j 2 4 2 6 2
Electronics
A a 1 2 0 1 2
B b 2 2 0 2 2
C c 2 2 2 2 0
D d 8 15 0 3 12
Electrical
A a 1 1 0 0 0
B b 1 1 0 0 1
C c 6 6 1 0 6
D d 1 1 2 0 2
E e 1 1 0 0 1
Mechanical

23
BOM
Key Item Qty Per
Organization
Org1
Org2
Org3
Org4
Org5
A a 1 1 0 0 1
B b 7 7 6 0 0
C c 1 1 0 0 1
D d 2 2 2 0 2
E e 8 8 6 6 12
F f 8 8 6 6 12
G g 2 2 2 0 2
H h 1 1 0 0 1
I i 1 2 1 0 1
Structure
A a 2 3 0 0 0
B b 0 0 2 2 2
Hardware/ Soft goods
A a 8 8 3 0 6
B b 1 1 1 1 1
C c 8 8 8 8 16
D d 2 3 2 2 2
E e 1 0 0 0 1
F f 4 6 0 2 4
G g 2 3 2 2 2
H h 2 2 2 2 2
I i 2 2 2 2 2
Ensembles
A a 8 22 6 6 12
B b 8 22 6 0 12
C c 8 22 6 6 12
D d 8 8 0 0 0
E e 8 22 6 0 12
Application Software
A a 1 1 1 1 1
6. Upon the analysis of the BOM, the source-of-design was identified to be the
following:

24
• Commercial Off The Shelf [COTS] items; 85% of end-item value.
• Government Off The Shelf [GOTS] items; 10% of end-item value.
• Developmental Items [DIs]; 5% of end-item value.
The above has significant impacts on managing modifications and Product
Support reliability processes.
Note the above value percentages are exclusive of system design/integration
costs.
50% of the value of the end-item is configured exclusively with short life cycle
reparable COTS items (i.e. XX sensor from XX OEM); it is assumed that these
items will be modified periodically. These modifications may include some minor
changes in capabilities. The modifications will primarily address Diminishing
Manufacturing Sources Material Shortages [DMSMS] issues, reliability
improvements and other non-capability enhancing changes. Upon each
modification event, projected failure costs are re-initialized based upon several
factors. All modifications are assumed to be vetted through the Test & Evaluation
[T&E] process. Funding will be sourced from the O&S/M POM. The analysis of
DMSMS issues has employed the OSD “SD-22, Diminishing Manufacturing Sources
and Material Shortages: A Guidebook of Best Practices for Implementing a Robust
DMSMS Management Program.”
7. The entire 6 year period of the system production stage will be delivered with
only one configuration for each BOM variant. Any modifications that will be
employed will occur only after the production life cycle stage is completed. Note
discussions are in progress to change the frequency of modifications. A “what-if”
cost analysis has been performed to better understand the impact of changes to
the BOM revisions levels during production.
8. It is assumed that there will be the following field and sustainment maintenance
activities employed during the life of the system:

25
• Field Maintenance
(The assumed field maintenance plan, for both reparable and non-reparable
items, is aligned with the Maintenance Allocation Chart [MAC]; currently in-
process of being validated).
• Correct item failure: driven by reliability issues.
• Replace item shrinkage: driven by the many item employed during
missions and the high probability that they will be lost, misplaced and
employed with poor record management.
• Correct minor damage: driven by CONOPS/OPTEMPO.
• Calibrate/test item.
• Replace use-driven items: generated by mission OPTEMO, such as wear
and tear on ensembles.
• Sustainment Maintenance
• Modify system: design change volatility impacts the frequency of
modifications. Broken down by COTS items, GOTS items and
Developmental Items [DIs]; note that these modifications are primarily
driven by DMSMS and reliability factors.
• Repair catastrophic damage to system: historical data that drives the
frequency of the process.
• Reconstitute/reset system: estimate of deployments that drive the
frequency of the process.
• Store system short/long-term: previous experience of the frequency
and duration of process.
• Renew reparable items.
Note that not all products configured in an end-item are employed in each
maintenance process (i.e. consumables are not modified).

26
9. The OPTEMPOs in Display 4a:i-4 are assumed to be employed throughout the life
of the program. The cost baseline of the BCA study utilizes an annual frequency
of 12 employments. Frequencies were provided by each end-user organization.
Display 4a: i-4
Annual Frequency Of The Use Of A XYZ System End-Item
Deployable Service End-Items (i.e. Garrison Training)
Org1 Org2 Org3
Org4
Active
Org5
ActiveActive
Non-
Active
Active
Non-
Active
Active
Non-
Active
4 2 6 4 1 .5 .5 15
Non-Deployable Service End-Items (i.e. Schoolhouse)
Org1 Org2 Org3
Org4
Active
Org5
ActiveActive
Non-
Active
Active
Non-
Active
Active
Non-
Active
12 10 10 10 2 1 8 -
10.Indirect costs were included in all calculations; primarily supervisory/
administrative personnel, facilities, equipment, materials and data/voice/imagery
infrastructure. They were derived as an estimated percentage of forecasted direct
(parts and tech labor) costs.
11.Due to the configuration of the XYZ system, little direct labor (i.e. maintainers) is
planned to be employed in field maintenance activities; these were considered
immaterial costs and were excluded in the BCA study cost analysis, though place-
holders were established if the assumption was to change.
12.Average age of fielded end-items is an input to failure and modification activities;
reflected in chart (Display 4a:i-5) below.
Display 4a:i-5

27
Average Age of Fielded End-Items (yrs)
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
20XX
0.5 1.0 1.5 1.9 2.1 2.4 3.2 4.2 5.2 6.2 7.2 7.8 8.6 9.2 9.8 10.0
13.The estimated acquisition unit cost of each item of the BOM was provided by
OEM. This unit cost is a primary cost driver; the assumption is that there is a high
correlation between the value of an item and the Product Support costs
associated with that item. For example a $10,000 sensor will incur a higher life
cycle Product Support cost than that of a $1,000 radio.
14.The estimated renewal/repair cost for reparable items were calculated as a
percentage of item acquisition cost. For example the repair cost of a $100 item is
20% of its value, or a $20 repair cost. Derived from discussions with OEMs and
like-kind product data sets.
15.The product classifications of all BOM items were provided by the OEM. This
element is a primary cost driver. There are 8 product classifications:
sensors/meters, electronic, electrical, mechanical, application software, structure,
hard/soft goods and ensembles. Each of these classifications has a different Cost
Estimating Relationships [CER] employed in target cost estimating.
16.The cost of a modifying an item was derived through a market survey; calculated
as a percentage of acquisition cost. Direct and indirect modification costs are 60%
of new; if an item value is $1,000 then a modification will cost $600.
17.The study calculates only in constant 2012 dollars; DoD can provide expected
inflation rate over the life of the system to reflect Current Dollars.

28
18.No Technical Data Package [TDP] is to be purchased for any COTS item.
4a:ii Ground Rules and Assumptions: Affordability Enablers
Continuous Process Improvement [CPI] initiatives were assumed to be employed
throughout the life of the system. A commercial CPI metric was employed that applied
data sets from the Bureau of Labor Statistics [BLS] as a baseline. It was assumed that
annually, 2.25% of cost savings, after a 20% “give-back” is provided to contractors,
could be achieved throughout the life of the system; this is compounded per year,
resulting in the CPI initiative providing an estimated savings of 19% over the 16 year
life of the system. These savings are obtained by the following three initiatives:
• Decrease the frequency of a process event.
For example, improve product reliability and as a result decrease the lifetime
quantity of an item employed in the process of fixing a failure.
• Decrease the duration of a process event.
For example, improve the supply chain management of a product by having the
right part, in the right quantity available to be employed in a Product Support
process.
• Lower the unit cost of a resource employed in a process.
For example, find a lower source for the repair of a reparable LRU.
The employment of the global commercial Product Support infrastructure was a
critical element in managing affordability. There were two areas that were
incorporated into Product Support solution sets:
• Use of the OEM’s distributors and depots for SCM support.
• Use of supplier-owned parts to support requirements for high cost/high tech
reparable items. The assumption is that supplier-owned reparable items
employed for Product Support will be able to be delivered to the production

29
process as a not-new condition item. This will have a dramatic impact upon parts
initial provisioning investment.
Manufacturer warranties are assumed to be in place for one year after each end-item
fielding. No costs for reliability-based failures are to be incurred during the first year
of the fielding of an end-item. This must be a negotiated CLIN in the production
contract in order to be effective.
Any post-fielding manufacturer warranties have not been assumed to occur, but it
could be an input to CPI initiatives.
Display 4a:ii-1 provides an overview of how warranty cost savings were calculated.
Greater detail is available upon a review of Hypatia.
4a:ii-1
1-Year Mfg Warranty Reduction Upon TOC; Covers Only Correct-Failure Product Support Process For
The First Year After An End-Item Has Been Fielded
Descriptions
Product Categories Configured In The XYZ Weapon System
Total
Sensors/
Meters
Electronic Electrical Mechanical Structure
Hardware/
Soft
goods
Ensemble
Application
Software
TOC Reduction
Per End-Item
Due To
Warranty
($000)
$1.7 $0.4 $0.1 $0.5 $0.0 $0.0 $0.0 $0.2 $3.0
Note two potential affordability enablers were not considered for this study, but could
be, if directed by leadership:
1. Bundled solutions from the OEM after the expiry of the manufacturing
warranty, which is often referred to as an “extended warranty.” Examples of
this solution set may include providing failed items, tech support and upgrades

30
for a fixed-price-per-period-per-end-item. This type of offering may or may not
be advantageous; it depends often on how a contract is crafted.
2. Long-term contracts that are beyond a 2-year period. Due to the volatility of
funding in the coming years, this area was not considered, but could be
revisited at another time.
The PM Office has chosen to follow the guidelines of a Product Support Enterprise
[PSE] management construct; reflected in the OSD Product Support Manager
Guidebook. Note that XYZ, as an ACAT X weapon system, is not required to employ
the PSM concept, but the PM Office has chosen to embrace it in order to meet
affordability objectives. It is estimated that for each one dollar of cost incurred in
employing the PSI Office, seven dollars will be eliminated as a result of affordability
improvement initiatives. Display 4a:ii-2 visually depicts the construct of a PSE.
4a:ii-2

31
4b. Analysis Methods, Tools and Rationale
The product profile materially impacts what processes are to be employed by the XYZ
system PSE, as well as the amount of resources that are to be engaged for each
process event. The following 4 elements comprise the product profile:
• Product category
• Product life duration
• Product maintainability strategy
• Source of product design
For the XYZ system, the following 8 product categories were extracted from the Bill Of
Material [BOM] file. Also included are examples of items in the product category. Each
category has distinct cost drivers for each Product Support process.
1. Sensors/Meters (i.e. Detector)
2. Electronic (i.e. Radios)
3. Electrical (i.e. Power conditioner/UPS)
4. Mechanical (i.e. Gear)
5. Structure (i.e. Container)
6. Hardware/Soft goods (i.e. Filter)
7. Ensemble (i.e. Harness)
8. Software/computer (i.e. Toughbook)
Below in Display 4b:ii-1 is the estimated product value content of each end-item for the
5 configurations to be delivered. Note that end-item product costs are still evolving, as
well as that of the final configurations.
Display 4b:ii-1
Product
Estimated Product Content Value Per End-Item
Org1 Org2 Org3 Org4 Org5

32
Product
Estimated Product Content Value Per End-Item
Org1 Org2 Org3 Org4 Org5
Sensors/ Meters $250,000 $310,000 $130,000 $250,000 $250,000
Electronics $40,000 $70,000 $10,000 $40,000 $50,000
Electrical $15,000 $20,000 $5,000 $1,000 $13,000
Mechanical $40,000 $70,000 $30,000 $20,000 $50,000
Structure $100,000 $150,000 $0 $0 $0
Hardware/ Soft goods $30,000 $40,000 $15,000 $30,000 $30,000
Ensembles $30,000 $90,000 $25,000 $10,000 $45,000
Application Software $10,000 $10,000 $10,000 $10,000 $10,000
Total $515,000 $760,000 $225,000 $361,000 $448,000
# of end-items to be fielded 216 18 143 11 57
End-item value fielded; does
not include integration costs
$111,240,000 $13,680,000 $32,175,000 $3,971,000 $25,536,000
Total end-item production
value
$186,602,000
For the XYZ weapon system, modifications are primarily driven by Diminishing
Manufacturing Sources Material Shortages [DMSMS] issues. Most products are COTS
items, whose End-Of-Life [EOL] considerations are driven by the OEM and their
commercial customers, and not the government’s Test & Evaluation [T&E] standards
group. Note that the PM Office’s T&E organization will be the focal point for controlling
all engineering changes for all items configured in a XYZ system BOM.
The 4 product life duration ranges below were established in this study to group
products into modification categories. Note that specific product modifications will be
block-upgrades; all systems are modified in the same period. An assumption is that all
fielded end-items during the planned six years of production would have the same
configuration; only after the end of production would modifications be planned to be
employed.
1. Very low (modifications every 3-5 years).
2. Low (modifications every 6-9 years).
3. Medium (modifications every 10-15 years).
4. High (modifications every 16-20 years).

33
The product maintainability strategy is driven by the Level Of Repair Analysis [LORA].
This strategy impacts the resources (i.e. parts, maintainers, tooling) positioned in the
field, as well as the forward and reverse supply chain flows. This study classifies all
items into one of the following 4 levels of repair strategies:
1. Reparable/Sustainment maintenance;
products are not to be renewed/repaired in field. They are to be removed and
evacuated to a contractor or government sustainment maintenance facility for
renewal/repair. These products are often referred to as Line Replacement Units
[LRUs].
2. Reparable/Field Maintenance;
products are to be renewed/repaired in the field either employing maintainers or
trained operators.
3. Non-reparable;
products cannot be renewed/repaired upon their impairment.
4. Consumable;
products are designed to be disposed after a period of use.
The source of product design materially impacts the: frequency of modifications,
reliability levels, the Source Of Repair Analysis [SORA], technical data accessibility and
other factors. All products are classified into one of the following 3 source of design
groups in this study:
• Commercial Off The Shelf [COTS];
product research and development by manufacturer was focused upon
commercial market. No Research & Development [R&D] funds were obtained
from DoD. This is the vast majority of XYZ system items.

34
• Government Off The Shelf [GOTS];
product development funding was incurred by another Government Program
Office. The product is available to be employed in other systems, without the
incurrence of the amortization of development cost. Note that there typically one
Inventory Control Point [ICP] for managing the Product Support parts activities
of this product. There were a small amount of products classified as GOTS in the
XYZ system.
• Developmental;
product development is funded by the PM Office. There were a small amount of
products classified as such in the XYZ system.
There are many Product Support processes that are employed in Field Maintenance and
Sustainment Maintenance. Each process drives specific demands for solutions. For
example some solution demand is driven by failure, some by the return of a combat
unit from deployment or some by random accidents.
Demand can be forecasted by two overarching techniques: independent demand, which
extrapolates historical data, or dependent demand, which analyzes the impact of future
events. This study is focused upon the latter, dependent forecasting.
For the study of this weapon system, the following 10 Product Support processes were
identified as driving the overarching demand for solutions:
• Field Maintenance;
Category of processes that are performed on the system in the field. Note that
the maintainer/operator resources employed will be immaterial for the XYZ
system. Most items will be evacuated for renewal/repair to a contractor or
government depot, as well as items requiring calibration. Note that this area is
still under discussions with the end-user organizations. Calibration does not

35
materially impact TOC.
1. Correct failure;
convert impaired item to non-impaired item. Note the terms “impaired” or
“non-impaired” are employed in this study to indicate that a product cannot
(impaired) or can (non-impaired) deliver its intended capabilities.
2. Correct minor damage;
fix only that which is damaged. Minor damage is a constant occurrence with
weapon systems; sometimes a product must be replaced, or cosmetic
damage can occur which may or may not be resolved.
3. Replace shrinkage;
with parts mobility and the very nature of its mission, products will be
misplaced/lost/abandoned. Most of this loss will occur with the large group of
consumables, but their cost impact is small. It is assumed that this shrinkage
will not be the result of Property Book losses charged to individual uniformed
personnel for expensive sensors.
4. Perform period-based testing/calibration;
this process is primarily focused upon safety issues. A product such as an
out- of-calibration meter assembly may be exchanged with a calibrated
product, or as in the case of the containment system may be calibrated on-
site.
5. Perform use-based renewal/replacement;
this process requires the replacement of a product that can no longer achieve
its intended capabilities. For example, a suit that is torn during it use while
employed in multiple training exercises is required to be replaced with a new

36
or refurbished harness.
• Sustainment Maintenance;
Category of processes in which products are not inducted in the field at the end-
user’s site.
6. Modify configuration of hardware and/or software;
not driven by change to capabilities. This process is typically employed via
block upgrades, at a specific point in time, at a contractor or government
depot or on-site.
7. Repair catastrophic damage;
major accidents occur due to combat, training events, and the normal course
of activities. This process is only employed when the end-item can be
economically returned to a mission capable condition; all end-items are
assumed to be returned to inventory after such an event.
8. Store short/long term;
some Services will temporarily or permanently employ forwardly deployed
end-items which may not be utilized, but will require preventive maintenance
nonetheless. Currently no planned spare end-items are to be stored long-
term.
9. Reconstitute/Reset;
upon the return of deployed warfighters, their returning equipment is
inducted into a process that disassemblies the equipment, cleans and fixes
anything that is impaired and reassemblies the equipment. The objective is to
return the equipment to a condition that existed before the deployment.
Other processes are often combined with this process.

37
10.Retirement/Tooling Storage/Demilitarization;
this is an EOL process. As a result of an assumption of a 6 year production
life and a 10 year fielded life, this process occurs during a 6 year period.
The management of the oversight of the system life cycle was also included in the
study. The following 2 processes were recognized as requiring oversight “jointness”:
1. Product Support Manager [PSM]/Product Support Integrator [PSI]
PSE performance oversight;
an on-going process that assures that the PSE is meeting Am and affordability
objectives. This also requires:
• Annually refresh of Product Support BCA.
• PSE JIPT meetings.
2. Design engineering/configuration control/Test & Evaluation
[T&E]/quality control/logistics;
these various activities assure the integrity of the XYZ system as a system-of-
record. Without a centralized control across all end-user organizations, the
system could rapidly deteriorate into systems with a variety of revision levels.
The missions of the organizations employing the XYZ system are the following:
• Org1;
support specific missions
• Org2;
support specific installations
• Org3;

38
• Org4;
• Org5;
support specific missions.
In the BCA study, the OCONUS locations of end-users employing the XYZ system are
further segmented into: Pacific locations (i.e. Alaska, Hawaii, South Korea, Guam
and Japan), Europe locations (i.e. Germany, Italy, Turkey, Portugal and the U.K.)
and West Asia locations (i.e. Afghanistan, Kuwait, Saudi Arabia, Qatar, Oman,
Kyrgyzstan and UAE).
Appendix-12:a; provides tables that identify all the system’s known locations,
mission and quantities employed by each end-user organization. The data sets will
be updated as fielding schedules are confirmed.
This study identified the requirement of a supply demand fill rate level of 90% for parts
in order to achieve at least an 80% Am. The calculation for supply demand fill rate is:
[# of demands fulfilled when required]/[# of demands].
Note that the above performance metric is applicable to any demand for a supply to be
employed in any Product Support process.
Note that Am is a metric for the global population of end-items; this metric is not known
to be captured in a systemic basis by all the end-user organizations. It is the intention
of the PSM/PSI organization to capture this data.
The supply demand metric has the following characteristics:
• Demand-to-receipt cycle time: 5 weekdays
• 90% of time demand-to-receipt cycle time achieved

39
• Daily operating hours/Days per week/Days per year: 8/5/260
• Fill rate performance period: 12 months for all
• Metric calculation technique: Rolling average for all
There are obviously many alternatives to the above; this BCA study has identified
the above as “reasonable” to meet Am and remain affordable. XX has delivered a
study to the PM Office that indicates that an 80% Am will be achieved based upon
their estimated reliability calculations and other factors; XX estimated that Am will
exceed 90%.
Note that in case of an “event” requiring supply to be forwarded to a location,
strategic safety stocks will be positioned globally, with the assistance of suppliers.
The objective is to reach any location in the world within 8 hours. Cost allowances
have been included for situations which require expedited delivery to an end-user;
these “extra” costs have an immaterial upon TOC.
Another issue related to Am is that the duration between end-item events will be, in
most cases, quite sufficient to deliver any solutions required to convert a non-
mission capable end-item to one that is capable at the time of its next planned
event.
Weapon system “affordability” is currently being emphasized in every PM Office due to
the evolving DoD budgetary constraints. Defining “affordability” can come in many
flavors. This study defines “affordability” as assuring that the portfolio of future
expenditures requested for the O&S/M POM funding cycle are optimally allocated to
meet the Warfighter’s Am requirements, as well as to meet the Total Ownership Cost
[TOC] objectives for the weapon system. The Product Support affordability calculation

40
is based upon a targeted-cost-per-end-item-per-period for all applicable processes
employed during the period.
All estimated targeted costs are derived from Hypatia©
, a Scenario-Based Product
Support Life Cycle Financial Planning software tool. Hypatia employs Cost Estimating
Relationships [CERs], a technique used to estimate a particular cost or price by using an
established relationship with an independent variable. If you can identify an
independent variable (driver) that demonstrates a measurable relationship with a
known cost, you can develop a CER; it can be mathematically simple in nature, such as
a simple ratio or it may involve a complex equation. Hypatia intertwines an Activity
Based Costing [ABC] technique with the CERs and employs mathematically simple
calculations.
ABC is a cost accounting method that measures the cost of specific activities. It assigns
cost to cost objects, such as products or customers, based on their use in activities. It
recognizes the causal relationship of cost drivers to activities. Cost drivers are assigned
for each Product Support process/activity. Cost drivers can include the number of
maintenance hours, the number of weapon system operating hours, and any factor that
can cause a change in the cost of an activity associated with a weapon system and its
support system. In addition, cost drivers affect direct and indirect costs and can be
linked to a cost object (i.e. an organizational division, a function, task, product, service,
or a customer). Indirect costs, however, are costs that cannot be directly linked to a
cost object.
The CERs employed have been accumulated over a 20 year period from a multiple of
sources: Security & Exchange Commission [SEC] data, trade journals, academic
publications actual experiences obtained by author, Subject Matter Expert [SMEs] and
other sources. A MS Excel workbook, the Hypatia© software product, with over 100
worksheets, provides the data sources for all the financial summary charts; see
appendix-j for Hypatia workbook (to be available upon final report delivery).

41
Reliability-based and usage-based demand item forecast assumptions were derived
from a large library of CER data sets obtained primarily from commercial sources;
mostly from public records of OEM financial reports, specifically the annual Security and
Exchange Commission [SEC] 10K Statement. These factors were employed as a
baseline for most cost targets. Below in Display 4b-1 is an example of these CER data
sets.
Display 4b-1
Note: In the CER above, sensors are twice as reliable as the overall commercial
equipment population; annual repair costs are .7% of a sensor’s value, versus a general
portfolio of products which is 1.4%
Also note that the DoD has corroborated the accuracy of the data sets employed in the
financial analytics of this study. Below in Display 4b-2 are outputs from the DoD
Display 4b-2
Funding Sources As A % Of Total Ownership Cost (TOC)

42
System
type
Product
R,D,T&E
[A]
Product
Procurement
[B]
Product
Operations
of O&M/S
[C]
Product
Maintain/
Sustain of
O&M/S
[D]
Product
Maintain/
Sustain as a
% of
Procurement
[D÷B]=[E]
Avg. Years
of Product
Life
[F]
Annual Product
Maintain/
Sustain $$ as a
% of Procure.
[E÷F]=[G]
Fixed wing
fighter
9% 30% 21% 40% 130% 25 5.2%
Ground
system
4% 24% 28% 44% 180% 25 7.2%
Rotary
wing
6% 29% 17% 48% 165% 25 6.6%
Surface
ships
1% 31% 30% 38% 120% 35 3.4%
Director of OSD Cost Assessment and Program Evaluation (CAPE) [formerly Program Analysis &
Evaluation (PA&E)] report to Congress June 2009; interpolation.
The chart in Display 4b-3 is an illustration on how reliability data sets were established
for the study.
Display 4b-3
COTS Reparable Item
Annual Field Maintenance Cost Due To Failure
Variable Description Value
A Reparable item value $1,000
B Average cost of repair as a % of item value inclusive of field maintainer labor 20%
A*B=C Average cost of repair $200
D
CER annual maintenance expenditures as a % of item value (item
sustainment maintenance/depot & field maintainer labor)
4.0%
A*D=E Commercial annual maintenance expenditure per year per item $40
F Commercial baseline OPTEMPO; hrs of use/yr 600
G Military OPTEMPO; hrs of use/yr 400
H Military hostile environmental factor weight 1.25

43
COTS Reparable Item
Annual Field Maintenance Cost Due To Failure
Variable Description Value
G*H=I Military weighted OPTEMPO 500
(I/F)*E=J Military annual maintenance expenditure per year per item $33
J/C=K % of items that will fail in any one year 16%
Note: Activity Based Costing [ABC] is the preferred approach at estimating the life cycle
Product Support cost of a weapon system; Operating and Support Cost Management
Guidebook (Draft) March 2012.
In the costing of failures, the graph below in Display 4b-4 was the technique employed.
Note that for products that were modified, reliability characteristics were reinitialized to
the baseline; all non-modified products continued to deteriorate annual. The rate of
reliability deterioration was 1.5% per year compounded.
Display 4b-4
Display 4b-5 is a schematic illustrating the detailed elements of the estimated baseline
target cost.
Display 4b-5
Failure
Rate
Product
Baseline
Mod Mod
No Mod
Time

44
c. Evaluation Criteria
The study attempts to optimize cost, Am “jointness” and unfavorable risks throughout
the life of the weapon system. Means to optimize costs were discussed during the BCA
IPT sessions, as well as with Subject Matter Experts [SMEs]. The following analytic
elements, some more than others, were applied to the financial analysis, as well as the
alternative analysis and the risk analysis: quantitative/qualitative values, scoring and
weighting, rank ordering/prioritization and sensitivity analysis.

45
5. Alternatives
5a: Current Baseline/Anticipated Initial Support/Status Quo
The Product Support life cycle cost baseline was driven by commercial factors that were
modified to reflect the various elements of a military environment. Due to the high
COTS item content of the XYZ system, and the availability of accurate commercial
Product Support data sets, the author primarily employed commercial data bases for
estimating target costs.
5b: Alternatives
This study’s focus upon alternatives was to analyze selective elements employed in the
business model of each PSE solution. Each solution was comprised of the following:
• The processes employed by a PSE.
• The product inducted by the process.
• The maintainability (i.e. field reparable) of the product.
• The source-of-design of the product.
• The volatility of the life of the product.
Below are descriptions of the primary alternatives business model elements analyzed.
Note that not all alternatives were reviewed; many were eliminated due to the
recognition that a specific alternative was not viable for a solution, either on an
efficiency or effectiveness basis.
Preferred alternatives were selected based upon the lowest variance from the target
cost, as well as risk factors.
Select an alternative business model element for the Supply Chain
Management [SCM] transactions that deliver parts to be employed in a
Product Support process.
Below are the six types of alternative SCM transactions that were considered in the
study for each solution requiring a SCM strategy. As discussed previously, the term

46
“impaired” is applied for items that cannot be employed in a mission and “non-
impaired” is applied for items that can be employed in a mission. Note that they are
applicable for every Product Support process employed throughout the life cycle of the
XYZ system:
1. Sale;
government or contractor supplier ships non-impaired item to customer. No item
is planned to be returned by the customer to the supplier. Disposal is performed
by the customer.
2. Dispose;
government or contractor supplier ships non-impaired item to customer.
Impaired item is to be returned by the customer for review, analysis, destructive
testing and disposal.
3. Supplier Forward Like Kind Exchange [SF/LKE];
a non-impaired reparable item is shipped to a customer from a rotable pool by a
government or contractor supplier. The customer ships its impaired item to the
supplier. The impaired item is inducted into a renewal/repair process and is
converted to a non-impaired condition. The non-impaired item moves to a
rotable pool to fulfill a future demand.
4. Customer Forward Like Kind Exchange [CF/LKE];
the customer ships its impaired item to the government or contractor supplier.
Upon the receipt of the impaired item, the supplier ships a non-impaired item
from a rotable pool. The impaired item is inducted into a renewal/repair process
and is converted to a non-impaired condition. The non-impaired item moves to a
rotable pool to fulfill a future demand.

47
5. Loan, Renew & Return [LRR];
the government or contractor supplier ships a non-impaired loaner item, from a
rotable pool to a customer. The customer ships the impaired item to the supplier.
The supplier converts the customer's impaired item to a non-impaired condition
and returns the same item back to the customer. Customer in turn returns the
non-impaired item loaner back to the supplier who in turn inducts the item into a
rotable pool after inspection.
6. Renew & Return [RR];
the customer ships impaired item to government or contractor supplier. The
supplier converts customer's item to a non-impaired condition and returns the
same item back to customer.
Select the one alternative of the Product Support solution business model
element that encompasses stocking policy, storage and ownership of parts
for field/retail, intermediate/regional and centralized/wholesale levels.
This alternative is driven by: inventory investment levels, indirect costs to manage parts
investment and parts availability to the customer. The following three factors impact
this element:
1. Parts storage echelon and stocking policy;
the locations where parts are positioned for distribution to a customer. Anyone of
the following 8 Product Support parts government or contractor supply
distribution scenarios in Display 5b-1 below can exist to fulfill a customer
demand. Note that there are other scenarios that can be developed as well. The
category of the stocking policy of “transfer only” indicates that the facility exist
primarily for transportation efficiencies in which parts shipments are consolidated
in order to move to the next supply echelon.
Display 5b-1

48
Alternatives
Parts Storage Echelons & Stocking Policy Alternatives
Wholesale/
Centralized
Intermediary/Regional Retail/Field
Store
Transferonly
Echelonnot
present
Store
Transferonly
Echelonnot
present
Store
Transferonly
Echelonnot
present
1 x - - - x - - - x
2 x - - x - - - - x
3 x - - x - - x - -
4 - x - - x - - - x
5 - - x x - - - - x
6 x - - - - x x - -
7 - - x - x - - - x
8 - - x x - - x - -
2. Parts storage;
who owns the stocking facility and who manages the facility. Display 5b-2 below
provides the six potential scenarios that can be employed by a PSE. Many of
these alternatives were considered when crafting the recommended PSE.
Display 5b-2
Parts Storage Alternatives
Alternative
Warehouse
Owner
Warehouse
Management
Govt. Contractor Govt. Contractor PPP
1 x - x - -
2 x - - x -
3 x - - - x
4 - x x - -
5 - x - x -
6 - x - - x
3. Part ownership;
who owns what and where. Each alternative can have a major impact upon

49
affordability, especially in a COTS environment where products have very low life
durations. The obsolescence issues for high-priced items in inventory have the
greatest impact upon the TOC of the XYZ system. Display 5b-3 identifies the
business model element alternatives available to the PSE.
Display 5b-3
Parts Ownership Alternatives
Alternative
Wholesale/
Centralized
Intermediary/Regional Retail/Field
Govt. Contractor Govt. Contractor Govt. Contractor
1 x - x - x -
2 - x x - x -
3 - x - x - x
4 - x - x x -
element that encompasses the management and ownership of depot
facilities employed in Sustainment Maintenance processes.
The Sustainment Maintenance processes of reconstitute/reset, modifications,
catastrophic damage repair, reparable renewal/repairs and long-term storage all require
facilities that stage, induct and deliver weapon systems and their reparable items. Title
X requires that Governmental depots review their ability to perform Product Support
processes for any new weapon system.
For the XYZ system, no COTS items were deemed available to be sustained in a
government depot; Technical Data Package [TDP] ownership and economically viable
test equipment acquisition were the primary drivers for depots not qualifying for
sustainment work. Display 5b-4 is a chart of the alternatives depot facilities that could
be employed for Sustainment Maintenance processes
Display 5b-4
Depot Sourcing Alternatives
Alternative Depot Owner Depot Management

50
Govt. Contractor Govt. Contractor PPP*
1 x - x - -
2 x - - x -
3 x - - - x
4 - x x - -
5 - x - x -
6 - x - - x
*Public Private Partnership
element that encompasses the key source-of-personnel resources employed
in processes.
Government Personnel Resources:
• PM Office.
• Life Cycle Management Commands [LCMCs]
o Inventory Control Point [ICP].
o Depots.
o Field Service Representatives [FSRs].
o Others.
• Defense Logistics Agency [DLA].
• Transportation Command [TRANSCOM].
Contractor Personnel Resources:
• Original Equipment Manufacturer [OEMs] internal product distribution
organization.
• OEM internal Product Support renewal/repair organization.
• OEM internal Product Support parts distribution organization.
• Suppliers to OEMs.
• Authorized OEM distributors.
• Independent parts distribution organizations.
• Independent renewal/repair organizations.
• Third Party Logistics [3PL] organizations.
• Application software product companies.

51
• Leasing companies: transport vehicles, facilities, equipment.
• System Engineering & Technical Assistance [SETA] providers.
Note: Public Private Partnerships [PPPs] and Limited Liability Corporations [LLCs] can
combine some of the above resources.
Reviewing the alternatives for “jointness” was also analyzed. Below are the three areas
in which jointness was reviewed:
1. Do any of the end-user organizations currently have a relationship with any of
the suppliers for this solution?
Having one PSP develop a supplier relationship is more efficient than each end-
user organization establishing their own relationship with the same supplier.
2. What % of the solution delivered is a traditional/organic approach?
The less traditional, the more centrally managed/joint required. Note for
improving affordability, “out of the box” solutions should be employed.
3. What is the volatility level of technology change for items employed in the BOM?
The greater the volatility, the more “jointness” required to control configuration
oversight and deal with the OEMs.

52
6. Mission and Business Impacts
6a: Jointness Challenges
This system poses many challenges for reaching joint solutions. The CONOPS of each
Service and their missions are highly varied. They are made-up of the following:
• Deployable end-items employed in garrison training.
• Deployable end-items employed in non-DoD exercises.
• Deployable end-items deployed.
• Non-deployable schoolhouse training.
• Stored deployable end-items.
In order to propose to PM Leadership any joint solutions, much give-and-take had to be
undertaken by the JIPT to craft such solutions.
6b: Benefits and Non-Financial Analysis
The benefit analysis section focuses upon the non-monetary factors influencing the
conclusions and recommendations of the BCA. The JIPT assessed the following factors
to be of importance:
• Create trust among all the end-user organizations to assure that the estimated
280 end-item sites will be adequately provided with Product Support solutions.
• Assure that the configuration/revision level of sensors is determined to be as
close as possible to state-of-art levels. All the end-user organizations currently
have some of the sensors employed in the XYZ system, but they are engaged in
different missions. End-users of the XYZ system do not want to be in a situation in
which their colleagues have sensors that are “better’ than that employed in the
XYZ system.

53
• As a system of record, each end-user organization is required to assure that their
property books track each end-item individually. The Org1, Org2, and maybe the
Org5, will be redistributing the individual items in the XYZ system into a parts
storage facility; though the physical XYZ system will no longer be one entity, a
virtual XYZ system configuration must be controlled for audit purposes. It is the
belief of the author of this study that this will be a challenge for all concerned;
this is a non-standard approach to positioning a weapon system of record.
• The management of ensembles is divided between new condition items and not-
new condition items. How inventories are balanced between the two conditions is
of extreme importance to field commanders; not-new items cannot be used in an
actual event, while not-new can be employed in a training event. Below in
Display 6b-1 is a chart in which each end-user organization can choose an
approach to stock new and not-condition ensemble items. Scenario #1 is the
least costly, with Scenario #3 more costly than Scenario #1 and Scenario #2
being the most costly. It is the recommendation of this author that active
discussions should be engaged with each end-user organization regarding the
scenario they wish to choose. Note that for the recommendation of this study,
Scenario #1 has been chosen; life cycle cost adjustment will be required for the
employment of other scenarios.
Display 6b-1
Ensemble Scenarios
Scenario
Ensemble On-System
Ensembles Off-System
(Class IX part)
at User Site
Distribution
Not-New
Condition
New-
Condition
Not-New
Condition
New-
Condition
Periodic
planned
replacement
of outfits:
On-
demand:
Critical
Event:
1 x - - -
new or not-
new condition
new or not-
new
condition
new
condition

54
Ensemble Scenarios
Scenario Ensemble On-System
Ensembles Off-System
(Class IX part)
at User Site
Distribution
Not-New
Condition
New-
Condition
Not-New
Condition
New-
Condition
Periodic
planned
replacement
of outfits:
On-
demand:
Critical
Event:
2 - x x -
new or not-
new condition
rotated
new or not-
new
condition
N/A
3 x - - x
new or not-
new condition
rotated
new or not-
new
condition
N/A
6c: Cost and Financial Analysis
Once the alternatives of the business model elements of the Product Support solutions
are selected, then the completion of the business model for the solution can occur.
Below are some of the key elements of the Product Support solution business model
that were common across all solutions.
Define the funding streams to the PSE.
In order for a Product Support BCA to be viable as a recommended path-forward for the
PSM/ILS Lead, funding sources must be defined for delivering all the solutions
throughout the life of a weapon system. Funding elements were identified for the
following life cycle segments:
• First year of an end-item fielding;
a no-cost product manufacturer warranty coverage will be employed for
reliability driven events. Warranty administration will be the responsibility of the
PM Office under an acquisition funding overhead expenditures. If there is no
manufacturer warranty coverage for a reliability driven event, the PM Office has
stated that it is committed to fund those expenditures. For non-reliability driven
events, the PM will also provide funding.

55
• Second year of an end-item fielding;
the PM Office has committed employing its funding sources to cover all
expenditures.
• Third year and beyond of an end-item fielding;
the end-user organizations will submit a POM for maintenance costs and
distribute funding to the PM Office to manage the recommended JPSP and the
remainder of the end-user organization’s POM funding is employed for non-JPSP
covered items.
Define the key management activities of each process employed by the PSE
that enable a value proposition to be delivered to the customer.
The following activities impact the delivery of the value proposition to the customer;
with each having a different weight upon each Product Support process. Note that
direct technical labor/maintainers are not considered to be an important resource
employed by the XYZ system PSE for field maintenance processes. The PSI must assure
that each Product Support solution has resources employed to manage the following
business model elements:
• Replenishment planning management;
this entails the forecasting of demands, lot sizing, lead time estimates, safety
and cycle stock level management and other tasks. If poorly managed, inventory
investments can become unaffordable and line item fill rates can be
unacceptable.
• Sourcing management;
the primary risk in this area is that the COTS items supply chains can become
“cold” due to DMS/MS and EOL issues, resulting that at times there must be a
shift from the acquisition of supply to the repair of supply, even though the item
was not originally intended to be repaired. This often leads to a paradigm shift in

56
Beyond Economic Repair [BER]/washout rate calculations.
• Reverse supply chain management;
this is primarily related to reparable parts and like-kind exchange and loaner
transactions. The key aspects of this activity is the cycle time of a customer
shipping a unit back to the supplier, the amount of time to renew/repair the item
and the time it takes to induct the part into a rotable pool. The poor
management of this activity often leads to an explosion in the inventory
investment of reparable parts in order to meet system availability objectives;
known as “feeding the fire.”
• LRU renewal/repair management;
again this is related to reparable items. It covers the management of the product
induction planning and flow at a government or contractor depot. The challenge
most encountered in this area is the issue of Beyond Economic Repair
[BER]/washout criteria. Traditionally Contract and Government Inventory Control
Point managers have employed a 65% repair cost threshold factor for BER; if
repairs are to exceed an estimated 65% of the Current Replacement Value
[CRV], the item is to be disposed and a new condition item is to be obtained.
BER analysis is quite different for COTS items; BER thresholds can be as low as
25% due to the extensive availability of reconditioned items in the commercial
market. Further details on this topic can be discussed in another venue. The net
result is that the PSE has many opportunities to improve affordability by
aggressively managing the BER COTS issue.
• Customer demand management;
providing a means to routinely receive parts orders, as well as to fulfill unplanned
demand requirements. It is the intention of the recommended JPSP to be a key
factor in this area; the JPSP will have a frugal demand management

57
infrastructure to manage its small population of items. It will be the role of the
PSM/PSI to oversee that all demand data sets are accurately captured in order to
be employed in analytics, such as parts forecasting.
• Transportation management;
the physical movement of items to and from the echelons of supply. The key
factor for this activity is movement cycle time. There is a balance between
focusing upon the efficiency of this activity, such as shipment consolidation,
versus the effectiveness of this activity, such as employing air transport versus
ground transport. The key driver for optimizing the balance of efficiency and
effectiveness is good supply chain management planning. A ratio of 95% of the
shipments being routine and 5% expedited is a benchmark metric for identifying
optimized transportation management.
• Storage management;
focus upon the control of supply record accuracy. Physical supply management,
such as warehouse material movement, is often not an issue of concern, but part
number and quantity accuracy is critical for item planning and ultimately the
stability of the management of the supply chain. An aggressive cycle counting
program, for a select group of mission critical items, should be implemented; this
is one of the lowest costs initiatives to reduce the risk of destabilizing the
management of the supply chain. Note that all items above a value of $5,000 will
be tracked by serial number; a rule of thumb is that these select cycle counted
items should be reviewed at a minimum of two times per year.
• Condition & configuration control management;
a critical activity for very-low life duration COTS items. These items are
continually being modified, hardware and software, in the OEM’s new condition
production processes; some modifications are not material to the Test &
Evaluation community, but others are germane. Engineering Change Proposals

58
[ECPs] must be filed when the item acquisition or the item renewal/repair results
in a change in configuration or revision level. This area will be challenging for the
PM Office.
As for item condition control management, there are many key items, especially
ensembles, which require conditions to be tracked. An example is the condition
of ensembles that are not-new, being applied for training, but they cannot be
employed in a “real” event requiring new condition ensembles.
Define the key resources that are required to be employed in the processes
by the PSE.
These are resources that are viewed as being of greatest value to the PSE in being able
to manage its processes efficiently and effectively.
• Information Technology [IT] Supply Chain Management [SCM]
software;
a critical resource for the PSE’s effectiveness and efficiency in managing Product
Support processes. Each of the Services has enterprise systems to manage their
supply chain. Most of the application software products employed for Product
Support processes have many challenges: code that only fulfills the partial
requirements of the user, poor training and/or high turnover of users, decoupling
of financial data applications with that of operational applications and much
more.
A robust audit of application software, both of that of the Government and
contractors, will be needed to ensure that the PSE has the ability to meet its Am
and affordability targets
• Data information;
this is the lifeblood of the IT SCM application software. Capturing all significant
data sets, and the validation of their accuracy, is of utmost importance for the

59
PSE; this is an area of great vulnerability for the PSE. As little as a 5% inaccuracy
of data sets can materially unfavorably impact decision making derived from the
application software.
• Item Management personnel;
these are key individuals in minimizing a volatile supply chain. The personnel
involved in this activity, at least for key items, must have the ability to perform
dependent demand forecasting, have technical knowledge and have financial
wherewithal. Key personnel in this function should be vetted by the PSM/ILS
Lead and the PSI to assure the optimum effectiveness and efficiency of the
processes that they are responsible to manage within the PSE.

60
7. Risk Analysis and Mitigation Plans
7a: Risk Analysis
The following 20 risk elements could materially change the output of the BCA study.
Each was considered in configuring the recommended PSE.
1. Mission and CONOPS:
When there is a mission or concept of operations change, the effect on the
program is all-encompassing. An advocacy change can be the stimulus, as can
the prospect of a conflict in a new geo-political environment.
2. Capability Definition:
Change in requirements.
3. Change in Strategic Vision:
Strategic vision tends to change slowly. The horizon is usually 5-20 years. If the
XYZ system time horizon was to change from 16 years to 25 years, major impacts
on TOC would occur.
4. Technology Capability Insertions:
Could dramatically change entire PSE construct requirements.
5. Interdependency:
Program interdependency with GOTS items from either other programs, or
originating from the XYZ system, could impact aspects of the PSE.
6. Interoperability:
Often a system is required to interoperate with another system developed
independent of another program. Changes in one of the interdependent

61
programs could affect the XYZ system PSE in such areas as supply chain
management.
7. Functional Solution Criteria:
If KPPs are changed, there would be a cascading impact upon the entire BCA
study conclusions and recommendations.
8. Funding:
If current funding for joint Product Support initiatives are changed, major
economies of scale would be reduced, resulting in the increase of the TOC.
9. Program Management and Contractor Relations:
If current relationships do not remain efficient and effective, between Contractor
XX and the PM Office, then opportunities for increased Product Support costs
exist; from configuring the PSI Office to increases in data calls.
10.Program Social Structure and PSE Development Environment:
A future deterioration in the BCA JIPT will have a major impact on the ability to
optimize jointness of the PSE.
11.Program Management Structure and Manning at Program Office:
Many of the same individuals have been involved in the Product Support BCA
initiative over the last 3 years; their turnover would result in the loss of a great
amount of the Body of Knowledge [BOK] of the PSE construct decision drivers.
12.Supply Chain Vulnerabilities:
Parts reaching EOL, sole-source relationships, supplier mergers/acquisitions and
many other factors can make it difficult to maintain timely access to critical parts
and supplies.

62
13.Program Office Schedule Performance:
Delays in developing a PSI would require certain assumed PSE efficiencies and
effectiveness to be compromised.
14.Production Quantity:
Changes in production quantities exposes the program to many consequential
changes; to economies of jointness, to price paid for parts and many others.
15.Data Ownership:
Any unanticipated conflicts of Intellectual Property [IP] rights could cause major
challenges during the Test & Evaluation [T&E] process; access to technical
manuals and other areas could be impacted.
16.Contractor Delivery Performance:
Fielding schedules can impact the development of the PSE and its employment of
resources; with over 280 end-item sites, this element could be extremely
disruptive.
17.Advocacy Change:
Advocacy changes occur when the potential value of the program diminishes or
increases relative to the advocate’s constituency. A senior officer may drop his
advocacy when he believes other sponsors will not address concerns of his
Service or because he/she believes their concerns are already addressed by the
program and the funding is needed elsewhere. With the current budget
challenges, this element is a very real concern that could change the scope of
the PSE.
18.Information Sharing Between Services:
Failure to share sufficient and accurate information between the PSM/PSI/PSPs

63
and the Services is fairly common and can create significant problems in SCM.
19.Industry Changes:
It is likely that key technologies employed in the XYZ system will rapidly evolve
resulting in increased capabilities and efficiencies. Industry consolidation will also
occur, resulting in less suppliers and in turn less choices in suppliers to negotiate
prices for item repairs and acquisition.
20.Test & Evaluation [T&E] Processes:
Applying traditional Developmental Item [DI] T&E processes could dramatically
delay the implementation of configuration changes for Commercial Off The Shelf
[COTS] items; the commercial world doesn’t wait for DoD to “approve” changes.
7b: Mitigation Plans
All the risks discussed in section 7a can be grouped into the following 7 categories:
1. Business/Programmatic:
Risk of undesirable consequences that affect the program’s viability, affordability,
and budget.
2. Operational:
Risk to the Warfighters’ ability to perform the mission as planned.
3. Process:
The potential for undesirable Product Support process performance that could
cause failure to meet the anticipated performance or standards.
4. Technical:
Risk associated with technologies that may render an alternative of little value.

64
5. Schedule:
Risk associated with time allocated for performing the defined Product Support
processes.
6. Organizational:
Risk associated with difficulties in implementing a change within an organization
employed by the PSE.
7. Sustainability:
Risk associated with implementing short term fixes that will cause problems in
the future; arsonist/fireman syndrome. Processes employed must be repeatable.
There are two primary approaches that were employed at mitigating the majority of the
risks above:
1. Establishing a PSE:
the construct of a PSE institutionalizes the management of risk mitigation. With
the PSI Office being accountable for assuring overall system performance for
Product Support processes, the PSM has “one button to push” when performance
“goes south.” Coupled with contractor suppliers having financial incentives for
superior performance, many risks would be identified sooner rather than later.
2. Delivering a BCA study:
the construct of a Product Support BCA study is configured to be continually
updated in a highly efficient manner, which enables the PSM/PSI Office to
“effortlessly” perform simulations to better understand the impact of changes
upon target costs and Materiel Availability throughout the life cycle of the
program.

65
8. Sensitivity Analysis
Given the construct of the Hypatia software tool, virtually any what-if sensitivity analysis
can be performed that impacts target costs. The 11 scenarios selected below in Display
8-1 were primarily chosen by the JIPT; the objective was to identify major and minor
cost drivers in order to focus discussions that would materially impact the outcome of
the BCA.
Display 8-1
Scenario#
What-If Sensitivity Analysis
Life Cycle Cost Change
Impact
%
Estimate
Cost ($M)
1
Increase product modification frequency by 20%
(i.e. Every 5 years to every 4 years)
+ 6.5% $18.7
2
Increase fielded period by 4 years (i.e. from 10
years post-fielding to 14 years)
+ 46.2% $133.5
3
Decrease response rate to fulfill Field Maintenance
demands from 90/95% to 80/85%
- 0.4% $1.1
4
Increase manufacturer's warranty from 1 year to 2
years
- 0.1% $0.3
5 Increase annual CPI initiative from 2.5% to 3.0% - 2.9% $8.3
6
Increase Org1A annual garrison training frequency
from 8 to 12 times per year
+ 6.0% $17.4
7
Increase annual Org2 schoolhouse training
frequency from 10 classes to 15 classes
+ 0.3% $0.7
8
Increase # of systems fielded by Org5 by 20%
(i.e. from 100 units to 120 units)
+ 6.3% $18.1
9
Acquire and store an additional 20% systems (i.e.
buy 80 additional units from original 400 units and
place in long-term storage)
+ 6.0% $17.2
10
Decrease frequency of replacement of ensembles
employed for all training activities by 20% (i.e.
replace every 10 events, instead of every 8
events)
- 8.0% $23.2
11
Modify all hi-tech fielded sensors every three
years; block upgrade
+ 14.2% $41.2
12 Field an additional 188 end-items for Org3 + 17.9% $51.7

66
9. Conclusions
9a: Selection of Preferred Alternatives for Each PSE Solution
Appendix b has the detailed conclusions.
9b: Financial Summary of the Results
Appendix c has the summaries.

67
10. Recommendations
10a: Specific Actions Based On Business Objectives
Create a Joint Product Support Provider [JPSP] to manage outfits, sensors/meters (hi-
tech only) and computer/application software. Display 10-1 provides a schematic of the
activities to be performed by the JPSP.
Display 10-1
The estimated annual targeted cost for the JPSP solution, exclusive of parts and
maintenance labor, is 4% of the annual targeted Product Support life cycle cost. The
JPSP would manage an estimated 78% of the overall Product Support life cycle costs.
Note that many of the products to be supported by the JPSP currently exist in each of
the Service’s product inventory. There may be challenges for the JPSP concept for some
of these products. One of the questions is how is each Service to decouple their Product
Support CONOPS for the same item that is employed in the XYZ system and those that

68
are non- XYZ system items?
One potential means of eliminating the conflict between managing the same products
that are found in XYZ system and as stand-alone products, with similar missions, is to
have the end-user organization take their stand-alone products and deliver them as a
Government Furnished Equipment [GFE] as part of XYZ system. For example if an
ensemble in XYZ system is configured with a quantity of 8, and other missions employ
the same ensemble outside of XYZ system with a quantity of 20, XYZ system would be
configured with a quantity of 28; a quantity of 8 would be acquired by XYZ system PM
Office and 20 would be provided as a supplement package that would be part of the
XYZ system configuration. This concept would require much discussion on whether it is
a viable option to consider.
Display 10-2 provides a recommended listing of those products to be supported by the
JPSP.
Display 10-2
JPSP Supply Chain Management [SCM]
Key Item Qty Per
Organization
Applicable
toJPSP
Org1
Org2
Org3
Org4
Org5
Sensors/ Meters
A a 1 1 0 0 1
B b 2 2 0 2 2 X
C c 2 0 0 2 2 X
D d 6 15 0 6 1
E e 2 2 0 2 4
X
F f 1 4 0 0 2
G g 4 6 4 6 4
H h 5 5 5 5 5 X
I i 1 2 1 1 1

69
Key Item Qty Per
Organization
Applicable
toJPSP
Org1
Org2
Org3
Org4
Org5
J j 2 4 2 6 2
Electronics
A a 1 2 0 1 2
B b 2 2 0 2 2
C c 2 2 2 2 0
D d 8 15 0 3 12
Electrical
A a 1 1 0 0 0
B b 1 1 0 0 1
C c 6 6 1 0 6
D d 1 1 2 0 2
E e 1 1 0 0 1
Mechanical
A a 1 1 0 0 1
B b 7 7 6 0 0
C c 1 1 0 0 1
D d 2 2 2 0 2
E e 8 8 6 6 12
F f 8 8 6 6 12
G g 2 2 2 0 2
H h 1 1 0 0 1
I i 1 2 1 0 1
Structure
A a 2 3 0 0 0
B b 0 0 2 2 2
Hardware/ Soft goods
A a 8 8 3 0 6
B b 1 1 1 1 1
C c 8 8 8 8 16
D d 2 3 2 2 2
E e 1 0 0 0 1
F f 4 6 0 2 4
G g 2 3 2 2 2
H h 2 2 2 2 2

70
Key Item Qty Per
Organization
Applicable
toJPSP
Org1
Org2
Org3
Org4
Org5
I i 2 2 2 2 2
Ensembles
A a 8 22 6 6 12 X
B b 8 22 6 0 12 X
C c 8 22 6 6 12 X
D d 8 8 0 0 0 X
E e 8 22 6 0 12 X
Application Software
A a 1 1 1 1 1 X
Some of the features of the CONOPS for the JPSP are the following:
• Each CONUS hub will have a dedicated team of two individuals who will have
their inventory in a tractor trailer providing supply for all life cycle Product
Support processes.
• The hub teams will access the commercial distribution channels of the COTS
suppliers for most of their supply. As a result, little initial provisioning inventory
will be required to be owned by the end-user organizations.
• The hub teams will have a scheduled route, based upon training events of the
end-users networked by the hub. The vast majority of events employing end-
items will be planned weeks in advance.
• The hub teams will be the “eyes and ears” of the PSI for data collection and
customer relationships.

71
• The hub teams will reset the inventory of ensembles based upon changes in
personnel assignments.
• All end-users for each hub network will be no further than 8 hours by vehicle and
1.5 hours by aircraft from their designated hub; covers 95% of end-users.
• For the Org3 and Org4, where the XYZ system end-items will be disassembled into
products, a virtual configuration control management must be in place by these
end-users. The hub team will be auditing the accuracy of the configuration
management in order for the PM Office to assure the configuration integrity of all
the end-items of this system of record.
• The hub team will coordinate all modification programs with the end-users. The
objective is to minimize the modification program’s impact upon Am.
• The hub team will perform all application software upgrades and fixes on the
notebook computer.
• The hub team will assure that new-condition outfits required for a “real” event
are available to be rapidly delivered to an end-user, if required.
• The hub team will provide solutions, on a case-by-case basis, to complement the
efforts of the end-user organizations for items that the hub team is not
accountable to support.
• The hub teams will be coordinated on a global basis through the PSP reporting
directly to the PSI.
There are many other aspects to the JPSP that are still in development. OCONUS hub
CONOPS is still in development; about 10% of demand will be generated from OCONUS

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