Operating and Support Cost Estimating Methods: An approach to estimate the US Navy’s future cost of Ballistic Missile Defense
Models and Methods Track
The Missile Defense Agency’s (MDA) Aegis BMD program provides a defensive shield against short and mid-range ballistic missiles. Currently a portion of US Navy ships are dedicating some of their at-sea operations to BMD. Additionally, the Sea Based X-Band (SBX) radar system is supporting BMD. Over the next seven years, MDA will add Aegis BMD capabilities to Romania and Poland. After these land-based sites are constructed, the US Navy will be responsible for operating and maintaining the systems and supporting infrastructure at each site.
Recognizing that these major components of BMD will require additional Navy-funding, leadership at the Naval Air and Missile Defense Command (NAMDC) posed the question: “What will be the cost of BMD to the US Navy?”
This paper details the authors’ estimating methodologies used to model the cost of BMD to the US Navy, the uncertainty associated with major cost categories, and the value of various data sources in developing cost estimates. The initial sea based BMD systems are part of Aegis Afloat and are installed on Ticonderoga class cruisers and Arleigh Burke class destroyers. In support of BMD a single SBX radar system is deployed in the Pacific and used for long-range target discrimination and tracking. The future land based BMD facilities in Romania and Poland are part of Aegis Ashore and installations are planned for 2015 and 2018 respectively. In addition to the operational systems there are other resources required by the Navy to support the BMD mission.
The Navy’s request for the operations and support (O&S) funding for BMD is complicated due to ships having multiple missions and the MDA BMD capability having multiple systems. A bottoms-up approach was used to combine the costs of many elements for each of the systems. Since the ships have multiple missions, an opportunity cost is associated with the amount of recourses assigned to BMD missions. Alternatively, Aegis Ashore O&S costs will be new Navy costs for which they will have to budget.
Many data sources were used to determine O&S costs for the land and sea based Aegis BMD systems. The primary source of data was the Navy Visibility and Management of Operating and Support Costs (VAMOSC) system. VAMOSC annual costs for enlisted, officers, and civilians were used to calculate personnel costs while facility investment and O&S costs for Navy installations around the world were used to determine Aegis Ashore costs. Additionally, detailed ship data was used to estimate the Aegis Afloat O&S costs.
Anti-ballistic operations have a long history but the current system has been operational for less than ten years and the Aegis Ashore system will be completely new. Because this BMD system is relatively new, uncertainties were defined for most of the specified requirements and historical cost data. The cost output of the model provides the probability of costs by major cost category.
The total BMD cost to the Navy is the aggregate of several unique and uncertain cost elements. The cost estimating effort required the development of various methodologies using a variety of data sources. This paper attempts to provide insight into how the most-likely cost estimate was developed, the availability of existing data and the treatment of requirements and cost uncertainty.
Brian A. Welsh
Mr. Welsh works for Technomics, Inc. in Arlington, VA. He has over 5 years of experience in the cost analysis arena working on projects for the Department of Defense, Department of Energy, National Aeronautics and Space Administration and the Intelligence Community. His current work focuses on cost research for the Navy’s Visibility and Management of Operating and Support Cost (VAMOSC) database. Mr. Welsh is also heavily involved in a Government Accountability Office engagement of the FAA NextGen systems. Prior to joining Technomics he worked for TASC, Inc. While at TASC Mr. Welsh was a manager of cost and financial analysis programs supporting the IC. Mr. Welsh is a Certified Cost Estimator Analyst (CCE/A), has a Bachelor of Science in Systems Engineering from the University of Virginia and a Master of Science from George Mason University in Operations Research.
Elizabeth A. Koza
Elizabeth Koza is a Cost Analyst at Technomics, Inc. and has over ten years experience in the analysis and estimation of costs associated with development, production, and operations and support (O&S) of weapons systems. Since joining Technomics in December 2005, she has focused on O&S cost estimating. She currently supports Navy Visibility and Management of Operating and Support Cost (VAMOSC) VIEWS. In addition, Ms. Koza has applied her O&S cost estimating knowledge by developing several O&S estimates for a variety of programs, including: Common Submarine Radio Room (CSRR), Littoral Combat Ship (LCS) Mission Packages, and Navy Ballistic Defense (BMD). Ms. Koza started her cost analysis career in July 2000 at the Naval Surface Warfare Center (NSWC) Carderock Division, where she primarily developed acquisition cost estimates for the Ohio Class SSGN Conversion Program. During this time, she was onsite at the Naval Sea Systems Command Cost Engineering and Industrial Analysis Division (NAVSEA 05C).
Ms. Koza earned her Bachelor’s of Science degree in Mechanical Engineering from the Johns Hopkins University in 2000 and her Master’s of Engineering degree in Systems Engineering from the University of Maryland in 2004.
Paul L. Hardin
Paul Hardin is presently employed as Technical Director with Technomics, Inc. Mr. Hardin’s principal areas of expertise are methodology design and model development, including expert application of nonlinear optimization techniques. Over the last several years, he has developed improved, innovative methodologies for high-risk, non-recurring acquisition cost elements (e.g., design engineering, software development and integration) and operating and support (O&S) cost elements. Mr. Hardin has played a
key role in the development of two Navy cost tools, Operating and Support Cost Analysis Model (OSCAM) and Navy Visibility and Management of Operating and Support Cost (VAMOSC) VIEWS.
Prior to accepting a position with Technomics, Mr. Hardin worked for the Office of the Secretary of Defense (OSD), Cost Analysis Improvement Group (CAIG) and the Naval Center for Cost Analysis (NCCA).
Mr. Hardin graduated from the Georgia Institute of Technology with a Bachelor’s degree in Industrial Engineering in 1991 and received a Master’s degree in Systems Engineering from Virginia Polytechnic Institute and State University in May 1999. He has been employed at Technomics since January 2001.
Naval Center for Cost Analysis
Hired by the Naval Center for Cost Analysis (NCCA) in November 2008, Mr. Greenberg has led an effort for estimating the Navy’s Operating & Support costs for Ballistic Missile Defense, developed cost estimates for the Navy’s Enterprise Resource Planning (ERP) program and performed a cost assessment for the Ship-to-Shore Connector concept. As the Head of NCCA’s Cost Research Branch, he continues to develop methods to improve upon existing cost risk methods and policy.
From October 2005 through October 2008, Mr. Greenberg taught for the Defense Acquisition University (DAU). At DAU, he taught acquisition professionals the principles of cost analysis and was involved in the development and delivery of various course curricula. Prior to teaching at DAU, Mr. Greenberg worked as a cost analysis for the Naval Sea Systems Command (NAVSEA, Carderock) for fourteen years. At NAVSEA Carderock, he conducted cost studies on Navy ships, submarines and emerging technologies. His efforts concentrated in risk analysis, cost modeling, technology cost and cost-benefit analysis. Mr. Greenberg also served on co-located cost teams that supported acquisition efforts for the New Attack Submarine Program, Future Aircraft Carrier Program and the Littoral Combat Ship Program. Prior to his career with the Navy, Mr. Greenberg worked as an electronics engineer for the US Army Information Systems Engineering Command where he provided support in simulation, design and construction of high frequency and microwave communication systems.
In 1987, Mr. Greenberg received his bachelor’s degree in ceramic science and engineering from the Pennsylvania State University. In May 1998, he received his master’s degree in engineering management from the George Washington University. Mr. Greenberg is professionally certified by the Society of Cost Estimating and Analysis as a Cost Estimator/Analyst and is DAWIA Level III certified in Business Cost Estimating and Financial Management. In 2003, he joined the Omega Rho International Honor Society, an organization that recognizes academic achievements in operations research and management science.