AMERICA’S ARMY: THE STRENGTH OF THE NATION Cost-Benefit Analysis (CBA) Step 1: Problem/Opportunity and Objective CBA 4-DAY TRAINING SLIDES UNCLASSIFIED Four-Day Training Briefing Version 3.0 (Draft) Last Updated: 10 November 2011 Visit our CBA Website for more information regarding locations, signing up, upcoming training sessions, and more https://cpp.army.mil Key Learning Objectives CBA team members will: • Use tools and techniques to develop statements describing: Problem/Opportunity Objectives Background CBA 4-DAY TRAINING SLIDES UNCLASSIFIED – – – Step Overview: Define Problem/Opportunity and Objective Define Problem/Opportunity and Objective • The Background/Strategic Context – • The Problem/Opportunity Statement: – 2 Define Define Scope; Scope; Formulate Formulate Facts Facts and and Assumptions Assumptions Provides the contextual information needed to understand the problem, need, or opportunity addressed in the CBA Defines unfulfilled customers’/stakeholders’ needs and expectations – Defines an opportunity to optimize/improve the performance of a product and/or service for the end user UNCLASSIFIED 3 Define Define Alternatives Alternatives 4 Develop Develop Cost Cost Estimate Estimate for for each each Alternative Alternative • The Objective: – Describes the role of the CBA: what is the decision to be made, and how does the CBA inform and support it What is the purpose of the analysis? 5 Identify Identify Quantifiable Quantifiable and and Non-Quantifiable Benefits Benefits 1Non-Quantifiable • Background: – Discusses the circumstances that describe a need for the CBA 6 Define Define Alternative Alternative Selection Criteria Criteria Selection CBA 4-DAY TRAINING SLIDES 7 Compare Compare Alternatives Alternatives 8 Report Report Results Results and and Recommendations Recommendations Key Questions: – – Does the Problem/Opportunity Statement provide a definition of the output performance issue/need? Does the objective meet the leadership’s needs? What major stakeholders are likely to be impacted? * Product(s) and/or service(s) are outputs with expected levels of performance (i.e., levels of efficiency and effectiveness) from a customer/stakeholder When customer/stakeholder expectations are not met, then there is an issue/problem requiring an alternative/solution Background/Strategic Context • “The background and circumstances define and assess the current state/condition They provide the contextual information needed to fully understand the problem, need, or opportunity CBA 4-DAY TRAINING SLIDES UNCLASSIFIED addressed in the Cost Benefit Analysis” (CBA Guide, “Step 1” https://cpp.army.mil) Background and Strategic Context • The problem/opportunity statement and objective should be accompanied by additional background information to help the reader understand various aspects of the problem • The context in which the problem exists The guidance from senior leaders that establishes the importance of the requirement The history of how the current situation came to exist Background information should be substantial enough for all stakeholders to understand and support the Problem/Opportunity Statement CBA 4-DAY TRAINING SLIDES UNCLASSIFIED – – – Background and the Status Quo • If the status quo isn’t considered a valid solution, the background information should explain why Guideline: The status quo might not be a valid option if the required performance is not being achieved For example: – If the CBA addresses a new requirement – one that is currently not being accomplished either well or poorly – there might not be a status quo – If the CBA objective is to improve output to a level that far exceeds the current level, there might not be a status quo In this – If the status quo achieves the desired output but does so at a high cost, the status quo might not be considered a valid alternative CBA 4-DAY TRAINING SLIDES UNCLASSIFIED case, the implicit decision has already been made to select a COA beyond the status quo Problem/Opportunity Statements • “A problem statement clearly defines the problem, mission need, and required capability When developing a problem or opportunity statement, the key is to state the problem or opportunity in terms of the organization’s mission that requires a solution to describe what the effort intends to accomplish.” (CBA Guide, “Step 1”, CBA 4-DAY TRAINING SLIDES UNCLASSIFIED https://cpp.army.mil) Problem/Opportunity Statement Key Questions Define the problem/opportunity succinctly in terms of Who, What, When, Where, and Extent UNCLASSIFIED WHO WHAT WHEN/HOW/ CBA 4-DAY TRAINING SLIDES WHERE EXTENT         Who is experiencing the issue? Who will receive the benefits from an improved product or service? Specifically, who are the stakeholders/process owners? What required performance is not being achieved? What are the problems being addressed: defects, delays, rework, mistakes, etc.? When, how, and where does the problem/opportunity occur? When did it begin? This could be as simple as “as long as we know” What is the extent of the problem in terms of magnitude or trend (changes in magnitude)? The Problem/Opportunity Statement should include this information Determining Unfulfilled needs Observations Problem/Opportunity Quality of Service: I am always transferred to three or more different people UNCLASSIFIED assistant to customer I’m getting my bill at different times of the month CBA 4-DAY TRAINING SLIDES Sorting of incoming calls, assignment of the correct It takes too long to process the application Delivery of Service: Lack of consistent standard for delivery date Efficiency of Process: Loan Cycle Time • Problem stated as predetermined solution instead of as problem, as in the form, “We need more money.” Problem does not reflect the stakeholder concerns • Problem is based on anecdotal information CBA 4-DAY TRAINING SLIDES UNCLASSIFIED • 10 Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2.5% per year for the past years, while the inflation rate for the same period has remained constant at 3% per year This fiscal year, the budget has been abruptly cut by 10% compared to the previous year Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft Hampton, which will soon be under repair and Determine the correct problem statement CBA 4-DAY TRAINING SLIDES UNCLASSIFIED unavailable for use 11 Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2.5% per year for the past years, while the inflation rate for the same period has remained constant at 3% per year This fiscal year, the budget has been abruptly cut by 10% compared to the previous year Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft Hampton, which will soon be under repair and UNCLASSIFIED unavailable for use Solution: Because the current storage facility at Ft Hampton will soon be unavailable for use, the Army must CBA 4-DAY TRAINING SLIDES determine the best way to store HMMWVs 12 Problem/Opportunity Statement Exercises 2) The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a CBA 4-DAY TRAINING SLIDES UNCLASSIFIED major supply route Determine the problem statement and objective 13 Problem/Opportunity Statement Exercises 2) The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a major supply route in Afghanistan Determine the problem statement and objective movement of critical supplies Objective—to inform Commander, USCENTCOM decision on alternatives for IED clearance CBA 4-DAY TRAINING SLIDES UNCLASSIFIED Solution: Problem statement—IEDs placed along major roads threaten the lives of coalition troops and the 14 Validate the CBA Problem/Opportunity Defining the problem/opportunity is the first step in developing players to ensure leadership agrees that the CBA addresses the decision CBA 4-DAY TRAINING SLIDES UNCLASSIFIED a CBA; however, it is important to collaborate with CBA key 15 Typical Stakeholders by CBA CBA Title Stakeholders “Detrick Earth Station Direct Communications Link In-sourcing Initiative” Dept of State, White House Communications Agency, OSD, U.S Northern UNCLASSIFIED Command “US Army Pacific G-2X (CI/HUMINT)” U.S Army Pacific Command, TRADOC, Intel CoE, NETCOM “Reserve Components Soldier Medical Support Center” U.S Army Reserve Command, G1, OSD, Dept of Veterans Affairs “Command Chief Warrant Officer Cost Benefit Analysis” USAR, Operational & Functional Commands, Expeditionary Sustainment CBA 4-DAY TRAINING SLIDES Commands “Transition of the Combat Support Agency Command” Combat Support Agency Command, Military Intelligence Readiness Command “Stryker Cost Benefit Analysis” Army Capabilities Integration Center, FORSCOM, AMC, G8 FD, ASA(ALT) 16 Objective Statement • The objective statement describes the role of the CBA: what is the decision to be made, and how does the CBA CBA 4-DAY TRAINING SLIDES UNCLASSIFIED inform and support it? What is the purpose of the analysis? 17 Objective Statement: Examples • • “To inform Congressional decision on funding for winter storage of HMMWVs at Fort Benning.” “To inform senior leader decision on the allocation of DAC, contractor, and military labor to perform the physical CBA 4-DAY TRAINING SLIDES UNCLASSIFIED security function at Camp Victory.” 18 Review Exercise: Henry Ford • In a rented garage at 58 Bagley Street in Detroit, Henry Ford completed his first gas-powered car on the morning of June 4, 1896 He had spent $250 FY1896 dollars on equipment to build the car, and $100 on labor The garage cost $15 per month to rent After the car was assembled, it was clear that it would not be able to fit through the door of the rented garage The car was to be used as a model for the two-year long test-driving phase of his R&D problem/opportunity statement and objective CBA 4-DAY TRAINING SLIDES UNCLASSIFIED process, with the final goal of arriving at a model for mass production and sale Determine the correct 19 Review Exercise: Henry Ford • In a rented garage at 58 Bagley Street in Detroit, Henry Ford completed his first gas-powered car on the morning of June 4, 1896 He had spent $250 FY1896 dollars on equipment to build the car, and $100 on labor The garage cost $15 per month to rent After the car was assembled, it was clear that it would not be able to fit through the door of the rented garage The car was to be used as a model for the two-year long test-driving phase of his R&D UNCLASSIFIED process, with the final goal of arriving at a model for mass production and sale Determine the correct problem/opportunity statement and objective Solution: Problem statement—the next phase of Ford’s R&D process cannot proceed without a drivable car Objective CBA 4-DAY TRAINING SLIDES —to inform Ford’s decision on how to obtain a car for test-driving 20 ... optimize/improve the performance of a product and/ or service for the end user UNCLASSIFIED 3 Define Define Alternatives Alternatives 4 Develop Develop Cost Cost Estimate Estimate for for each each Alternative... the CBA: what is the decision to be made, and how does the CBA inform and support it What is the purpose of the analysis? 5 Identify Identify Quantifiable Quantifiable and and Non-Quantifiable... the decision to be made, and how does the CBA CBA 4-DAY TRAINING SLIDES UNCLASSIFIED inform and support it? What is the purpose of the analysis? 17 Objective Statement: Examples • • “To inform