2013-M202

Computing Fully Burdened Costs of Energy – Fuel (FBCE-F)

Methods and Models II Track

M2-2_Presentation_ComputingFullyBurdenedCostsOfEnergyFuel_Cooper

Abstract:

The Defense Science Board, in studies conducted in the early years of the past decade, concluded that the DoD was not according sufficient emphasis to the consumption of energy in the battle space. Based on those studies, DoD leadership has elevated the importance of seeking opportunities to deliver more capable forces that consume less energy. The Joint Capabilities Integration and Development System now requires an energy Key Performance Parameter. Pilot studies have been conducted to establish a framework for the computation of the fully burdened costs of energy (FBCE) that, by statute, must now be used to inform cost, schedule and performance trade decisions in Analyses of Alternatives (AoAs). Based on those pilot efforts, the Assistant Secretary of Defense (Operational Energy Plans and Programs) has recently published a framework for computing FBCE. A detailed and thorough understanding of this framework is essential for cost analysts supporting AoAs.
The framework has two components: (1) the total cost of delivering energy to units on the battlefield (referred to as the Assured Delivery Cost (ADC)) and (2) the amount of energy that a warfighting unit consumes in AoA scenarios. For ground combat units, these computations can be arduous. To address this problem, we developed a tool sufficiently robust and efficient to address changes in all the elements of the computation of FBCE.
Our approach begins with developing a full understanding of the supply chain used to support the fighting unit. We then used the Army’s FORCES model to determine the manpower and equipment assigned to each unit in the supply chain. We estimated the duration of the supply chain operations, made appropriate assumptions about security requirements, and computed the ADC. We computed FBCE for each AoA scenario by multiplying the ADC by the energy consumed in each AoA scenario. Our approach has been incorporated into an Excel workbook with full documentation in an accompanying report.
Our approach provides a solid framework from which FBCE for any energy-consuming force can be computed. However, the framework alone does not answer the mail. Key to its successful implementation is an ongoing conversation among the AoA study director’s staff, energy logisticians, and cost analysts.

Future refinements could address the following:
• The model assumes an AoA scenario in a major combat operation taking place in a mature theater. However, the Army expects to fight across a broad range of operational themes, including peacetime military engagement, limited intervention, peace operations and irregular warfare. Energy supply chains will be different for each type of operation. Development of a suite of models to address the different types of supply chains would be useful.
• The Components are making substantial investments in alternative energy sources, including biofuels, solar and wind. The use of each energy source will entail the establishment of a supply chain tailored to that energy source. Costing techniques for alternative supply chains need to be developed.

Author(s):

Walt Cooper
Technomics, Inc.
Walt Cooper is a Senior Cost Analyst with Technomics, Inc. in Arlington, Virginia. He has led the development of cost estimates in cost-benefit analyses for an Army program office and led the preparation of estimates for a new Army combat system. He is preparing a guide for the analysis of sustainability-related costs for major weapon systems, and he is refining procedures for estimating the fully burdened cost of energy for Army combat systems.
Prior to joining Technomics, Walt was an Operations Research Analyst in the Cost Assessment and Program Evaluation (CAPE) Directorate, Office, Secretary of Defense (OSD). As a CAPE analyst, Walt led the development of independent life cycle cost estimates of the Army’s Future Combat Systems. He served as the DoD coordinator for the Visibility and Management of Operating and Support Costs (VAMOSC) program, which collects actual operating and support (O&S) costs for the three military departments’ weapon systems. He initiated the development of requirements for collection of costs from sustainment contractors. He prepared independent estimates of the O&S costs of the Navy’s CVN-21 program and the USMC’s V-22 program (OSPREY). Pursuant to a provision in the Weapon Systems Acquisition reform Act of 2009 (WSARA), Walt authored a report to Congress on the DoD’s methods for tracking and assessing O&S costs for major defense acquisition programs.
Walt has a BA in mathematics from the University of Vermont, an MBA in operations research and systems analysis from Tulane University, and an MS in finance from The American University. His military awards include the Silver Star, the Defense Superior Service, and the Legion of Merit. His civilian government service awards include the Office of the Secretary of Defense Award for Excellence and the Medal for Exceptional Civilian Service.

Richard Lee
Technomics, Inc.
Richard C. Lee received his B.S. in Mechanical Engineering in 2007 from Virginia Polytechnic Institute and State University. He joined the Advanced Vehicle Dynamics Laboratory at the same institution and started his graduate studies on modeling and simulation of terrain profile models using numerical methods and vehicle dynamics. He received his M.S. in Mechanical Engineering in the spring of 2009. He is a member of the Society of Cost Estimating and Analysis (SCEA), the American Society of Mechanical Engineers (ASME), and the Institute For Operations Research and the Management Sciences (INFORMS). A Cost Analyst at Technomics, Inc., he has supported the Office of the Secretary of Defense, Cost Assessment and Program Evaluation (OSD CAPE), the Office of the Deputy Assistant Secretary of the Army for Cost and Economics (ODASA-CE), and the Naval Center for Cost Analysis (NCCA) on projects spanning Earned Value Management (EVM) analysis, data collection and cost research, and risk analysis.