AMERICA’S ARMY: THE STRENGTH OF THE NATION Cost-Benefit Analysis (CBA) Four-Day Training Briefing CBA 4-DAY TRAINING SLIDES UNCLASSIFIED Step 5: Benefits Version 3.0 (Draft) Last Updated: 10 November 2011 Visit our CBA Website for more information regarding locations, signing up, upcoming training sessions, and more https://cpp.army.mil Key Learning Objectives Objectives: • • Understand the nature of benefits Understand the types of benefits • Quantitative vs non-quantitative Objective vs subjective Recognize what constitutes a well-crafted benefit CBA 4-DAY TRAINING SLIDES UNCLASSIFIED • • 1 Define Define Problem/Opportunity Problem/Opportunity and and Objective Objective 2 Define Define Scope; Scope; Formulate Formulate Facts Facts and and Assumptions Assumptions UNCLASSIFIED 3 Define Define Alternatives Alternatives 4 Develop Develop Cost Cost Estimate Estimate for for Each Each Alternative Alternative CBA 4-DAY TRAINING SLIDES 5 Identify Identify Benefits Benefits 6 Define Define Alternative Alternative Selection Selection Criteria Criteria 7 Compare Compare Alternatives Alternatives 8 Report Report Results Results and and Recommendations Recommendations Definition: Benefit • “Benefits of a chosen alternative are results expected in return for costs incurred They are the quantitative and qualitative results expected or resulting from the implementation of a project/initiative (which may include but are not limited to the following: equipment, facilities, hardware, systems, etc.).” CBA 4-DAY TRAINING SLIDES UNCLASSIFIED (CBA guide, “Step 5”) Primary Benefits • In the CBA, the most important benefits to include for each COA are the primary benefits: the benefits most relevant to the objective being sought UNCLASSIFIED • Primary benefits should answer the question, “How does this COA serve as a solution to the stated problem?” Problem Statement COA description Primary benefit of COA Product manufacturing time exceeds the limit Expand manufacturing facility and personnel Product manufacturing time expected to be specified by mission requirement by 15% by 20% reduced to 10% under mission requirement CBA 4-DAY TRAINING SLIDES limit Current residential facilities insufficient to Move 400 civilians currently living in COA will vacate living quarters for the 400 new accommodate influx of 400 new soldiers due temporary on-base quarters to off-base soldiers expected on base to upcoming BRAC housing Secondary Benefits • When most or all of the COAs under consideration have nearly identical primary benefits then it will be necessary to consider and include Secondary benefits Secondary benefits answer the question, “How well does the COA solve the problem?” – Secondary benefits can include: reliability, feasibility, amount of training required, ease of acquisition, time required for • Secondary benefits receive less weight than primary benefits, but they may be used to distinguish between COAs that provide similar primary benefits CBA 4-DAY TRAINING SLIDES UNCLASSIFIED implementation, and other “perks” like resale or reuse value Identifying Benefits When identifying benefits, consider the following: The CBA problem statement (from Step 1) usually states or implies a desired benefit (the primary benefit) Ask the question: How well does this COA achieve the benefit implied in the problem statement? • CBA problem statement: Identify the optimum process to achieve timely, error-free submission of personnel performance UNCLASSIFIED appraisals – The clearly stated benefits or metrics are (a) timely submission and (b) error-free submission If a COA appears to deliver relevant benefits that are not encompassed by the problem statement, perhaps CBA 4-DAY TRAINING SLIDES analysis should be modified Are the benefits objective, and can they be quantified? Types of Benefits • Quantifiable vs difficult to quantify – UNCLASSIFIED • Objective vs subjective – – • Quantifiable benefits can be measured Objective benefits are matters of fact Subjective benefits are matters of opinion Note that difficult to quantify is not the same as subjective Some subjective benefits can be quantified CBA 4-DAY TRAINING SLIDES – Types of Benefits (cont’d) • The table indicates the possible array of benefits, with examples in each cell Quantifiable Customer satisfaction UNCLASSIFIED Subjective Difficult to Quantify Morality Flexibility Adherence to policy Life, safety, health Objective Order-ship time N/A – All objective benefits can be Cycle time measured, usually with a number or Error rate sometimes with a yes/no indicator CBA 4-DAY TRAINING SLIDES Vehicle speed Weapon survivability Desired Characteristics of Benefits UNCLASSIFIED • Benefits should be – – – – – • Relevant Reasonable Specific Logical Clear Try to identify benefits driving the decision  Objective benefits facilitate the decision-making process, because they help to remove opinions and emotion from CBA 4-DAY TRAINING SLIDES the discussion They build the strongest case for the preferred COA  Overstatement of benefits is the primary source of bias in CBAs It is difficult to overstate objective benefits 10 CBA 4-DAY TRAINING SLIDES UNCLASSIFIED Well-Crafted Benefits 11 Benefits Best Practices Problem Statement: “We need a more user-friendly IT ARFORGEN tracking system.” UNCLASSIFIED Benefits should be CLEAR • Bad: – • COA improves ARFORGEN greatly (or color code green) Good: – The improved system in COA has 20% fewer required user inputs, an easier to read interface, and reduces the CBA 4-DAY TRAINING SLIDES expected training/orientation time by hours per user 12 Benefits Best Practices (Cont’d) Problem Statement: “We need to achieve satisfactory levels of proficiency in job related tasks.” UNCLASSIFIED Benefits should be SPECIFIC • Bad: – • Alternative increases Doctrinal Currency, Soldiers trained and current in their duties Good: – Alternative provides a trainer-student ratio of 1:10 This will enable trainers to spend more time with each CBA 4-DAY TRAINING SLIDES student and help them achieve the desired degree of proficiency 13 Benefits Best Practices (Cont’d) Problem Statement: “We need an extremely mobile weapon platform that can UNCLASSIFIED provide indirect fire support to assist in ground operations.” Benefits should be RELEVANT • Bad: – • Good: – CBA 4-DAY TRAINING SLIDES COA1 provides clear communications between infantry and armor units The addition of an auto-loading 120 mm mortar in COA1 allows the Main Battle Tank to fire beyond the line of sight, increasing the current range by 5,000 feet This will enable an armor company to provide the indirect fire capability comparable to infantry heavy mortar platoons, and with no measurable reduction in mobility 14 Summary In identifying benefits, address one COA at a time … comparison comes later Benefits can be financial or operational / functional Objective benefits remove emotion and bias from the decision-making process Develop benefits that are – – – – – Relevant Reasonable Specific Logical Clear CBA 4-DAY TRAINING SLIDES UNCLASSIFIED • • • • 15 Exercises Problem Statement: “Need to transport 4,000 lbs of medical supplies from one bank of the Amazon River to another within 96 hours to support an Army humanitarian CBA 4-DAY TRAINING SLIDES UNCLASSIFIED mission in Brazil.” For the following COAs, what metrics would enable a good comparison of benefits and/or risks?: Build a permanent steel bridge across the Amazon Build a collapsible aluminum bridge across the Amazon Ford the river Use makeshift rafts to float supplies across Turn around and head back to Sao Paulo, and charter a plane across the Amazon 16 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 CBA 4-DAY TRAINING SLIDES UNCLASSIFIED process, with the final goal of arriving at a model for mass production and sale 17 Review Exercise: Henry Ford • Identify primary and secondary benefits for each of the following Courses of Action: COA1 (Status Quo): Leave the car in the garage, nothing else COA2: Disassemble the car and reassemble it outside the garage COA3: Obtain permission of garage landlord to widen the garage door CBA 4-DAY TRAINING SLIDES UNCLASSIFIED – – – 18 Mini-case Exercise #5 or “how many can I get for $1.2B?” • The Chief of Staff, Army has apportioned $1.2B for the procurement of customized “Longbow Apache 2” helicopters and “Abrams 2” tanks in support of the troop surge in Iraq Each customized Apache helicopter may be purchased at a flat rate of $60M each Due to increasing UNCLASSIFIED marginal costs of production, the price for the Abrams tank is semi-variable The first 24 tanks produced can be purchased at a rate of $10M each; the next 40 tanks can be procured at a rate of $12M each; every subsequent tank purchased beyond these first 64 will cost $15M each CBA 4-DAY TRAINING SLIDES [Note: Fictional] 19 Mini-case Exercise #6 or “where the lines cross?” • U.S Army Central Command has secured $118M for the procurement of two different models of the “HIMARS 2” multiple rocket launcher—class X and class Y—for deployment to Afghanistan The class Y HIMARS costs $5M each and weighs 27,000 pounds The class X HIMARS costs 14 may be procured After procurement, all the HIMARS will be transported to Afghanistan by a fleet of ten C-130 Hercules aircraft The total weight constraint is 405,000 pounds CBA 4-DAY TRAINING SLIDES UNCLASSIFIED $7M and weighs 12,000 pounds The class X model is produced using a rare metal: no more than 20 ... Define Define Problem/Opportunity Problem/Opportunity and and Objective Objective 2 Define Define Scope; Scope; Formulate Formulate Facts Facts and and Assumptions Assumptions UNCLASSIFIED 3 Define... Define Define Alternatives Alternatives 4 Develop Develop Cost Cost Estimate Estimate for for Each Each Alternative Alternative CBA 4-DAY TRAINING SLIDES 5 Identify Identify Benefits Benefits 6... Results Results and and Recommendations Recommendations Definition: Benefit • “Benefits of a chosen alternative are results expected in return for costs incurred They are the quantitative and qualitative