Definition General Info Policies Guides Communities Training Related
Definition
A methodology used to acquire and operate affordable DoD systems by setting aggressive, achievable Life Cycle Cost (LCC) objectives and managing achievement of these objectives by trading off performance and schedule, as necessary. Cost objectives balance mission needs with projected out-year resources, taking into account anticipated process improvements in both DoD and industry. CAIV has brought attention to the government’s responsibilities for setting/adjusting LCC objectives and for evaluating requirements in terms of overall cost consequences. The CAIV process recognizes that the best time to reduce life-cycle costs is early in the acquisition process (e.g., it makes sense for the PM to spend development funds in order to save a greater amount of production costs and/or operating and support costs later). Cost/performance tradeoff analyses should be conducted before an acquisition approach is finalized.
General/Information/Narrative
As stated in DoD Directive 5000.01, all participants in the acquisition system are expected to recognize the reality of fiscal constraints, and to view cost as an independent variable. Cost in this context refers to Life-Cycle Cost, which should be treated as equally important as performance and schedule in program decisions. To institutionalize this principle, program managers should consider developing a formal Cost As an Independent Variable (CAIV) plan as part of the acquisition strategy.
Once an Initial Capabilities Document (ICD) has been approved, a CAIV strategy will be formulated as part of the acquisition strategy to set cost objectives. By program initiation, the PM shall have established life-cycle cost or total ownership cost objectives for the program, including objectives for Research and Development cost, Procurement cost, Military Construction cost, Operating and Support cost, and Disposal cost. At each subsequent milestone review, the PM will reassess these cost objectives and the progress made toward achieving them.
The implementation steps in a CAIV plan will depend on the type of system and its current phase in the defense acquisition management system. In general, however, a CAIV plan would include the following elements:
Set Cost Goals. The CAIV plan would include cost goals for unit procurement cost and operating and support (O&S) costs. The unit procurement cost goal typically would be established for a specified quantity of systems and a specified peak production rate. The O&S cost goal would be an annual cost per typical deployable unit (e.g., battalion or squadron) or individual system (e.g., ship or missile), given specified and documented ground rules and assumptions (such as the program basing plan and the system operating tempo). The goals should be challenging but realistically achievable. The goals in the CAIV plan might be the same as the cost goals in the Acquisition Program Baseline (APB), or possibly might be more aggressive. Conceivably, the APB goals might be more conservative for programs with a greater degree of risk, to provide some margin of error.
Perform Trade-off Studies. Cost, schedule, and performance may be traded off within the "trade space" between thresholds and objectives documented in the capability needs document. The CAIV plan would show the timing, content, and approach for the specific trade studies to be performed. Over time, as the system design matures, the trade studies become more refined and specialized.
Establish Cost Performance Integrated Product Team. Although led by the program manager, the CAIV process requires collaboration with the user as well as other acquisition and logistics organizations. The CAIV plan would designate a Cost Performance Integrated Product Team (IPT), which most likely would receive considerable support from the system contractor. The Cost Performance IPT would monitor the CAIV implementation and oversee the trade studies.
Provide Incentives. The elements of the acquisition strategy should describe incentives to the contractor that directly support, or are at least complementary to, the CAIV plan. Such incentives might include award fees, sharing of cost savings, or other (positive or negative) incentives.
Establish Metrics. The CAIV plan should address how metrics will be established to track progress and achievement of unit procurement and O&S cost goals. The plan should identify how progress toward achieving the goals will be monitored and reported. The plan also should describe how cost estimates will be updated and refined over time, and compared to the original cost goals. The plan should identify specific organizational responsibilities, and identify related major events where progress toward achieving goals will be assessed.
Policies, Directives, Regulations, Laws
DoDD 5000.01, 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. In addition to life-cycle cost estimation, CASA can perform trade-offs, production rate, warranty effectiveness, and other economic analyses, and thereby track the system cost against established objectives. 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
Teaching Note: Cost as an Independent Variable (CAIV): https://acc.dau.mil/adl/en-US/30380/file/5380/06%20-%20CAIV%20TN%20-%20Apr%...
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