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Affordability Assessment 2
Definition
A determination that the Life Cycle Cost (LCC) of an acquisition program is in agreement with the long-range investment and force structure plans of the DoD or individual DoD Components.
General/Information/Narrative
Affordability plays an important part in program decisions throughout the life cycle. Even before a program is approved for formal initiation into the systems acquisition process, affordability plays a key role in the identification of capability needs. Program affordability is part of the Joint Capabilities Integration and Development System (JCIDS), which balances cost versus performance in establishing Key Performance Parameters (KPPs). Moreover, all elements of life-cycle cost (or total ownership cost, if applicable) are documented as part of the Capability Development Document (CDD) and the Capability Production Document (CPD) (section 16 in both documents). To ensure the program is affordable, cost goals are established in terms of thresholds and objectives to provide flexibility for program evolution and to support further Cost-As-an-Independent-Variable (CAIV) and other system performance and program schedule-related trade-off studies.
DoD Instruction 5000.02, Enclosure 4, Table 3, requires Affordability Assessments for all acquisition programs at Milestones B and C. The purpose of the assessment is to demonstrate that the program's projected funding and manpower requirements are realistic and achievable, in the context of the DoD Component's overall long-range modernization plan. Normally, this assessment requires a DoD Component (or even DoD-wide) corporate perspective, and so the Affordability Assessment should not be prepared by the program manager. Rather, the assessment typically should be conducted by resource analysts in the DoD Component headquarters or a supporting organization, or alternatively in the OSD staff. For a joint program, the Affordability Assessment may be prepared by the lead DoD Component, although it may be necessary to display separate analyses for each DoD Component, as appropriate.
For Major Defense Acquisition Programs at Milestone B, the Milestone Decision Authority (MDA) must certify in writing to the Congress that the program is affordable, and that the Director of Cost Assessment and Program Evaluation (DCAPE) concurs with reasonable cost and schedule estimates to execute the program development and production plans. Other certification requirements are listed under 10 U.S.C. 2366b.
It is desirable to conduct sensitivity analyses and other excursions as part of the Affordability Assessment. The sensitivity analysis might address the effect of different cost estimates or programmatic assumptions concerning the acquisition programs in the mission area of interest. In addition, it is desirable to conduct excursions such as different assumptions about the DoD Component's top-line projected beyond the six-year programming growth.
Policies, Directives, Regulations, Laws
U.S. Code Title 10 § 2366b
DoDD 5000.01, The Defense Acquisition System
DoDI 5000.02, Operation of the Defense Acquisition System
Best Practices, Lessons Learned, Stories, Guides, Handbooks, Templates, Example Tools, Communities of Practice, LEC Tools
Defense Acquisition Guidebook: https://acc.dau.mil/adl/en-US/350719/file/49150/dag_08-05-10pdf
The Computerized Optimization Model for Predicting and Analyzing Support Structures (COMPASS) is a system Level of Repair Analysis (LORA) modeling tool. LORA is the analytical methodology used to determine the maintenance repair levels where items should be removed and replaced; and ultimately repaired or discarded. COMPASS estimates the cost to repair or discard items at various maintenance levels, with contractor facilities included as a separate level. COMPASS optimizes both the maintenance and support to achieve your target operational availability (Ao). COMPASS can consider up to four levels of organic maintenance (supports Two-Level Maintenance studies), supply support, and contractor support. You can also use COMPASS output data as a source for developing the MAC and SMR codes. COMPASS is a free tool available to both DoD and contractors at: https://www.logsa.army.mil/lec/compass/.
The Cost Analysis Strategy Assessment (CASA) Life-Cycle Cost Estimating Software uses an engineering cost model to estimate total cost of ownership based on RDT&E, Acquisition/Procurement, O&S, and Disposal activities. Compass can help with the affordability assessment by providing an estimate of life-cycle cost and sensitivity analyses to identify cost drivers. CASA is distributed freely to all US personnel. Request from foreign nations for CASA and associated training and technical support are handled through a Foreign Military Sales Case (FMS). CASA can be obtained here: https://www.logsa.army.mil/lec/casa/.
Training Resources
Related Articles
Required for:
All acquisition programs at Milestones B & C
For Major Defense Acquisition Programs, the Milestone Decision Authority (MDA) must certify in writing to the Congress that the program is affordable.
Responsible Activity:
The Program Manager is responsible for ensuring affordability of the program. The DoD component headquarters, support organization, or OSD staff is responsible for conducting the assessment.
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