Use of Life Cycle Cost Estimates in OMB-300 Budget Reporting
Life Cycle Cost Track
Major capital asset investments within the federal government are required to submit program budget estimates as part of the OMB-300 Business Case. In cases where the program has already completed an estimate of life cycle cost (LCC) within another document (such as an Analysis of Alternatives or Economic Analysis), it is often desired to use the LCC as the basis for the initial OMB-300 budget submission. However, the process of conversion from an LCC to an OMB-300 budget involves potentially complex adjustments for inflation, scope, and reporting format.
The inflation conversions require an understanding of agency and appropriation-specific indices, and may require the analyst to convert each cost element within the LCC separately.
Differing levels of detail and unique reporting requirements of the OMB-300 required format further complicate the process. Certain cost elements commonly found in an LCC are not appropriate for inclusion in any of the OMB-300 cost categories. For example, Status Quo phase out costs, or infrastructure expenses funded outside of the program budget are often included in an LCC but excluded from the program budget and OMB-300 budget. Conversely, it is also possible that a complete OMB-300 budget estimate may require the reporting of costs that are outside the scope of the LCC. For example, sunk costs are reported in the prior year column of an OMB-300 budget, but excluded from most LCC estimates.
The formatting requirements of an OMB-300 budget report present additional challenges. For example, OMB-300 requires that the costs of federal government labor be separated from the remainder of the estimate, and reported in both dollar and FTE terms. Contractor labor, however, is combined with other contract costs and aggregated into categories of Planning, Acquisition, and Operations & Support.
This paper proposes a standard methodology for a conversion from a typical LCC to the OMB- 300 budget. The process is annotated with examples and lessons learned from real world experience. The topic is highly relevant not only to programs wishing to create an OMB-300 budget estimate, but to any analyst that wishes to develop a budget estimate using an LCC estimate as the basis.
David Brown is a Research Fellow at LMI. His primary areas of expertise are cost analysis, database development and management, and acquisition program management. Since joining LMI in October, 2003, Mr. Brown has participated in numerous cost analysis tasks that require life cycle cost estimates and OMB 300 submissions. Notably, he led multiple cost tasks for the Defense Commissary Agency, which required life cycle cost estimates within Analysis of Alternatives, Economic Analysis, and OMB 300 documents. Mr. Brown recently participated in a project for the Coast Guard Logistics Information Management System (CG-LIMS) Alternatives Analysis , which required a life cycle cost estimate and an OMB 300 submission. Mr. Brown has also completed cost estimates for programs including Coast Guard Deepwater, NOAA IOOS, GSA Eforms, Army EMIS, Army CBDP, and NASA ENS.
Prior to 2003, Mr. Brown served as a cost analyst for Fujitsu Consulting (formerly DMR Consulting), TechTeam Government Solutions, Inc (formerly Vector Research), and Management Analysis, Incorporated. Mr. Brown presented a paper to the 1996 SCEA conference on recent work in the area of activity based costing.
Mr. Brown is a (SCEA)-Certified Cost Estimator/Analyst (C/CEA). He holds a bachelor’s degree in Engineering and Policy with concentrations in Economics and Computer Science from Washington University in St. Louis.
Kevin Cincotta joined Technomics in December, 2009. As a senior analyst with over 13 years of experience, Kevin has worked on or led myriad projects within the Department of Defense and civil agencies. His primary areas of expertise are cost analysis, database creation and management, and statistics. His recent clients have included the Coast Guard Research and Development Center (RDC), General Services Administration (GSA), Air Force Cost Analysis Agency (AFCAA), and Office of the Secretary of Defense, Capability Assessment and Program Evaluation (OSD CAPE). Currently, Kevin assists the Defense Acquisition University (DAU) in enhancing the curriculum by which it trains and certifies acquisition professionals. He will supports the Government Accountability Office (GAO) in performing cost and earned value management (EVM) assessments.
From 2001 to 2003, Kevin served as a Senior Cost Analyst at MCR, LLC. He worked closely with government clients at the Missile Defense Agency (MDA) to develop a radar cost model, which was presented by MCR at the 2004 Society of Cost Estimating and Analysis (SCEA) conference.
Kevin also led several cost analysis-related tasks at the New Vectors (formerly Vector Research, Incorporated and the Altarum Institute) from 1997 to 2001. Notable systems on which he had a major role in creating life cycle cost estimates (LCCEs) and/or business case analyses (BCAs) include the Standard Procurement System (SPS), the Defense Occupational Health Readiness System (DOHRS), and the Simplified Tax and Wage Reporting System (STAWRS).
Kevin is a frequent presenter at both the Department of Defense Cost Analysis Symposium (DODCAS) and SCEA conferences. He is a (SCEA)-Certified Cost Estimator/Analyst (C/CEA). Known by some as “The Nature Boy,” he serves on the committees that create and review exam questions for the updated C/CEA exam, and has created several model questions for the new exam. He holds a master’s degree in economics and philosophy from the London School of Economics and Political Science, and a bachelor’s in the same fields from the University of Virginia.