Developed based on information provided by Mr. Mario F. Wozniak Chief, Reserve Personnel Army (RPA), Budget Division US Army Reserve Command G8 Author:

Developed based on information provided by Mr. Mario F. Wozniak

Chief, Reserve Personnel Army (RPA), Budget DivisionUS Army Reserve Command G8

Author: Mr. William T. Huddleston, MSOR, MSME

Army Cost Benefit AnalysisArmy Cost Benefit AnalysisA Case StudyA Case Study

Battle Assembly Travel Reimbursement

A Case Study

Army Cost Benefit AnalysisArmy Cost Benefit AnalysisBattle Assembly Travel ReimbursementBattle Assembly Travel Reimbursement

Terminal Learning ObjectiveTerminal Learning Objective

3

Author: William T. Huddleston, MSOR, MSMEGovernment Management Institute

©

• Task: Perform Army Cost Benefit Analysis• Condition: You are training to become an ACE

with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors

• Standard: with at least 80% accuracy: • Review the Army 8 Step Cost Benefit Analysis process• Apply Cost Benefit Analysis to the Battle Assembly case

Army Reserve Command

Overview


Army Reserve Command Leadership

A 3- star General leads the US Army Reserve Command and holds the following two titles:

1. Chief, Army Reserve (CAR): Reports to Chief of Staff of Army; represents Army Reserve in policy and planning discussions with Army, Department of Defense and Congress

2. Commanding General (CG) of the US Army Reserve Command (USARC): Reports to Army Forces Command; responsible for staffing, training and readiness of most Army Reserve units in continental US and Puerto Rico

Army Reserve CommandMission

Provide trained, equipped, and ready Soldiers and cohesive units to meet the global requirements across the full spectrum of operations. The Army Reserve is a key element in The Army multi-component unit force, training with Active and National Guard units to ensure all three components work as a fully integrated team.

Responsibilities•Operational tasks; training, equipping, managing, supporting, mobilizing, retaining Soldiers •Troop Program Unit (TPU) Soldiers; Commands, controls, supports Army Reserve troop units CONUS.

Exception: Psychological Operations and Civil Affairs units•Ensures readiness of forces; prepares over 1,700 units to mobilize and deploy to wartime theater

Army Soldier Profile (FY09)1,112,703 Soldiers

Travel reimbursement is an existing issue within the ARC.

“Soldier reimbursement of travel expenses to a Battle Assembly (BA)”

BA consist of monthly drills; soldiers practice military skills to maintain individual and unit

readiness in case of mobilization and deployment


Case Study Overview

Request initiated by US Army Reserve Command to: Extend National Defense Authorization Act (NDAA) to:

• Authorize travel reimbursement for “specified group” of Soldiers traveling to Battle Assembly outside normal commuting distance (>150 miles) especially;- Soldiers with critical Military Occupation

Specialties - Soldiers affected by Base Realignment and Closure

(BRAC)- Units with designated leader shortages


Army Reserve Command (ARC) request to reimburse travel related expenses is based on:

- Impact on morale, and personal finance issues for AR soldiers

- Increased recruiting and training costs associated with AR Soldiers lost through attrition

- Adverse impact to Operational Readiness by loss of Soldiers in critically needed categories through attrition

- ARC’s Continuous Improvement effort modeling (ARFORGEN) and minimize “cross leveling”

Case Study Overview


Travel reimbursement to ARC Soldiers’ required to travel more than 150 miles to BA is being considered for several reasons:

- Maintaining competitive edge by providing more benefits and promotion opportunities for skilled AR soldiers

- AR promotions require some reservists move to new units beyond normal commuting distance

- Maintaining camaraderie with fellow Soldiers is highly valued in ARC

- BRAC is increasing soldier travel distance for BA and this is expected to impact more reservists with additional base closures

Case Study Overview


Assumptions:- Operational Readiness is a high command objective

- ARC desires to support continuous improvement modeling (ARFORGEN’s enhancement is very important)

- Economic conditions, promotions, Base Realignment and Closure (BRAC), and desire for Soldiers to stay in unit, result in increased number of soldiers traveling >150 miles to BA

Case Study Overview


Assumptions (continued):-Annual “out-of-pocket” Soldier expense is estimated between $500-$4,000 for travel to BA. Case will average travel expenses to Battle Assembly (BA) = $1,500-Recruiting and training cost is estimated at $75,000 per Soldier-Operational Readiness is impacted when critically needed Soldiers leave service-Inflation rate 2% per year-Estimate travel reimbursement costs for 1 year and 10 years

Case Study Overview


Assumptions (continued):-Army reserve staff level = 205,000 soldiers

-5,000 AR soldiers are affected by BRAC; 2,500 or half of these soldiers are considered critical or skilled positions

-50,000 AR soldiers travel > 150 miles to BA; 24,000 are considered critical or skilled positions

-Predict current AR soldier attrition rate decrease 0.5% if critically needed Soldiers are reimbursed for travel

-Not all AR soldiers will be reimbursed for travel expenses

Case Study Overview


The commander identified some non-quantifiable factors that could be considered in a CBA:

Image to general public Soldier value perception Soldier home financial stability Soldiers’ morale is important Increased Operational Readiness ARFORGEN enhancement

Case Study Overview


Cost Benefit Analysis (CBA)

Review

Case Study Overview


What is Cost Benefit Analysis?

A of comparing both and costs and

benefits (positive/negative), against specified Courses of Action (COA) to determine the best

.

Case Study Overview


What is Cost Benefit Analysis?

A structured methodology of comparing both quantifiable and non-quantifiable costs and benefits (positive/negative), against specified Courses of Action (COA) to determine the best enterprise solution.

Case Study Overview


Why do we need a Cost Benefit Analysis?

1.

2. When making resourcing decisions:• Treat cost (both near and long term) as an

upfront consideration, not as an afterthought• Obtain visibility of project value and positive and

negative consequences to a decision path

Case Study Overview


Why do we need a Cost Benefit Analysis?

1. To make a better use of limited funds

2. When making resourcing decisions:• Treat cost (both near and long term) as an

upfront consideration, not as an afterthought• Obtain visibility of project value and positive and

negative consequences to a decision path

Case Study Overview


Army CBA 8 Step Process

1. Define and scope the problem/opportunity2. Formulate assumptions and constraints3. Define alternatives4. Develop cost estimate for alternatives5. Identify quantifiable and non-quantifiable benefits6. Define alternative selection criteria7. Compare alternatives8. Report results and recommendations

Case Study Overview


BBBENEFITS MUST BALANCE OR OUTWEIGH COST

BENEFITS

The sum of quantifiable and non-quantifiable benefits:

Quantifiable benefits

Cost avoidances

Non-quantifiable benefits

Greater capacity Faster availability Better quality Improved moral Other

COST

Quantifiable cost

Direct Indirect Initial/Start-up Sustainment Procurement

Non-quantifiable

Life/Safety/Health Perception/Image Opportunity Risk/Uncertainty Political

1. Define and scope the problem/opportunity

2. Formulate assumptions and constraints

3. Define alternatives4. Develop cost estimate

for alternatives5. Identify quantifiable

and non-quantifiable benefits

6. Define alternative selection criteria

7. Compare alternatives8. Report results and

recommendations


Battle Assembly Travel Reimbursement Case Study

Team Exercise

Case Study


Case Study Instructions

• Break up the class into 4 teams• Each team is tasked to respond to all 8 steps of the CBA

process. • Time will be provided for the teams to discuss each process

step. After team discussion, each team will present their findings.

Case Study


Case Study Discussion


1. Define and Scope the Problem / Opportunity

Questions for the Reviewer

- Does the problem statement define a clear, unambiguous issue?As appropriate, does the objective reflect an enterprise perspective?

- What major stakeholders are likely to be impacted?

Case Study Discussion


2. Formulate Assumptions and Constraints

Questions for the Reviewer:

- Are the assumptions realistic? Were they provided by an appropriate subject matter expert?Are the assumptions or facts structured in a way that favors one alternative COA?

- Do the assumptions, and facts clearly identify the natural and/or artificial limits or expansions placed on the solution set?

Case Study


3. Define Alternative Courses of Action

Questions for the Reviewer:- Have all feasible alternatives been considered, to include

alternatives that represent creative thinking?- Have the alternatives been defined or described clearly, and to

a sufficient level of detail to support the development of a cost estimate?

- Is the status quo included, or is its absence explained?- Do the alternatives span a reasonably wide range of potential

solutions?

Case Study


4. Develop Cost Estimate for each Alternative

Questions for the Reviewer:- Does the cost estimate span the appropriate life cycle?- As appropriate, does the documentation clearly differentiate

between a cost-perspective estimate and a POM/budget-perspective estimate?

- Are the cost estimates for each COA structured in a way that supports apples-to-apples comparison?

- Is the cost estimate backed up by supporting documentation:- Data sources identified?- Rationale and methodology explained?- Analysts/POCs identified?

Case Study


5. Identify Quantifiable and Non-Quantifiable Costs and benefits

Questions for the Reviewer:

- Do the perceived benefits reflect an enterprise perspective?

- Are the benefits consistent with the problem statement?

Case Study


6. Define Alternative Selection Criteria

Questions for the Reviewer:- Are the selection criteria appropriately tailored to the

problem statement or requirement?- Has appropriate consideration been given to both cost and

non-cost criteria?- If weighting of selection criteria has been used, has the

leader agreed with the weighting?- Do the selection criteria appear unrealistically skewed to

favor one alternative?


$0 $0

Cost Benefit

Alternative #1: No Travel Reimbursement

No incremental benefits or costs

A “Cost-Benefit Balance” Visual


Readiness


Alternative #2: All Reservists

Are Unquantifiable Benefits in morale and readiness worth $56M?

$75M

Cost Benefit

Morale

$19M




Alternative #3: Critical & BRAC only


$36M

Cost Benefit

$11M

$44MMorale

Readiness




Alternative #4: BRAC only


$8M

Cost Benefit

$2M

Morale

Readiness



Making a decision requires answering the questions on the previous slides

How can you evaluate and compare the non-quantifiable costs and benefits?

The Decision Matrix is one method of comparing alternatives


Case Study


7. Compare Alternatives

Questions for the Reviewer:- Does the analysis clearly demonstrate how the

recommended COA best satisfies the selection criteria?

- Is the recommended billpayer consistent with Army priorities? Do the benefits of the recommended COA justify the billpayer?

- Are second- and third-order effects identified, and are the negative impacts acceptable?

Case Study


8. Report Results and Recommendations

Questions for the Reviewer:- Does the package contain all key elements, accompanied

by supporting documentation?- Does the recommended COA address the problem, and is it

consistent with the assumptions and constraints?- Does the analysis explain how the recommended COA is

best at satisfying the selection criteria?

39

Step 8: Report Results and RecommendationsExecutive Summary

• Problem:

• Brief description of methodology and number of COAs considered to determine the best menu choice.

• Existing or new funding?

• Recommendation:

• Cost to Implement: – $ – Other:


Battle Assembly TrainingCase Study

Instructor’s Support Material

• Length Time: 4h – Briefing 15-20 min, break out in teams to prepare each of the

points average 10 min per point area, presentation and discussion average 15 min per point, wrap up 15-20 min.

• Process – Introduce the case– Break the class into groups of 4– Each group needs to prepare material for presentation results– Use the excel templates as applicable

• Presentation– Discuss findings with participants and agree on main points to

ensure that they are on the right truck– Introduce support for each point after students’ presentation

Battle Assembly Training - Instructor’s Support Material

Objectives:• Apply the CBA and by using it:• bring out the issues at hand• think though possible alternatives and support

• Point to the:- Ranking process, and - Weight sensitivity since these are the key areas influencing

the decision- Realize the need for support for a cost informed decision

Battle Assembly Training - Instructor’s Support Material

Case Study


1. Define and Scope the Problem / Opportunity

ARC soldiers are adversely impacted by having to paytravel costs to attend Battle Assembly.Compare costs and benefits of extending travel reimbursement to ARC Soldiers traveling to BA.

Case Study



- Current law does not allow for reimbursement of Soldier travel to Battle Assembly

- Limit travel reimbursement to soldiers traveling greater than 150 miles to BA

- Estimate 50,000 Soldiers travelling to BAs are not reimbursed- 24,000 of the 50,000 Soldiers have critical skills positions- Soldiers spend average $1,500 annually traveling to BAs- ARC Soldier attrition rate = 20%- Travel reimbursement can reduce ARC attrition by .5% - AR staff level = 205,000 Soldiers

Case Study



- Economic conditions, Soldier promotions as well as BRAC increase travel distance to Battle Assembly

- 5,000 AR Soldiers effected by BRAC - 2,500 Soldiers impacted by BRAC have critical skills- Annual training for new recruits averages $75,000- Operational Readiness is extremely important- Soldier morale very important- ARFORGEN enhancement is very important- Not all AR Soldiers can be reimbursed for travel to BA

Case Study



- Calculate costs for 1 year and 10 years- Use 2% inflation rate

Case Study


3. Define Alternative Courses of Action

1. No travel reimbursement to Battle Assembly (Status Quo) 2. Reimburse all Soldiers travelling to Battle Assembly greater

than 150 miles3. Reimburse only critically needed Soldiers and Soldiers

impacted by BRAC travelling to Battle Assembly greater than 150 miles

4. Reimburse only Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles


4. Develop Cost Estimate for each Course of Action (COA)

Cost Estimate Battle Assembly Travel Reimbursement

($'s in Millions)

COA # 1 No Battle Assembly Travel Reimbursement1 year cost 10 year cost FY12

Travel cost 0.00 0.00 0.00Training Cost Savings 0.00 0.00 0.00Total 0.00 0.00 0.00

COA # 2 Reimburse all Soldiers traveling > 150 miles to BA1 year cost 10 year cost FY12

Travel cost 75.00 821.23 75.00Training Cost Savings -18.75 -205.31 -18.75Total Inc Cost 56.25 615.92 56.25

COA #3 Reimburse Critically Skilled and BRAC1 year cost 10 year cost FY12

Travel cost 43.50 476.31 43.50Training Cost Savings -10.88 -119.08 -10.875Total 32.63 357.23 32.63 COA #4 Reimburse BRAC only

1 year cost 10 year cost FY12Travel cost 7.50 82.12 7.5Training Cost Savings -1.88 -20.53 -1.875Total 5.63 61.59 5.63

COST

Travel Reimbursement Cost

COA #1 No travel reimbursement(Status Quo)

COA #2Reimburse all Soldiers travelling >150 miles

COA #3Reimburse Critical Soldiers and BRAC travelling >150 miles

COA #4Reimburse only BRAC Soldiers travelling >150 miles

QUANTIFIABLE1 year

10 years

$0

$0

$75M

$821M

$43M

$476M

$8M

$82M

NONQUANTIFIABLE

Public ImageOperational ReadinessMorale

4. Develop Cost Estimates For Alternatives



• Step 5. Identify Quantifiable and Non-quantifiable Benefits

• The primary benefit is reduced attrition

• Soldiers lost through attrition must be replaced, increasing training costs

COA #12 AR soldiers = 205,000 205,000 soldiersReimburse all Training cost 75,000 per soldier annually 75,000 dollars

Reduced Attrition rate = 0.5% 250 soldiersAnnual training Savings -18,750,000 training dollars# AR Soldiers travel > 150mi = 50,000 50,000 soldiersAvg Travel Reimbursement Cost = $1,500 1,500 dollarstotal annual travel reimburse cost 75,000,000 travel dollarsInflation 2% per year

COA #3 AR soldiers = 205,000 205,000 soldiersReimburse only Training cost 75,000 per soldier annually 75,000 dollarsCritically skilled Reduced Attrition rate = 0.5% 145 soldiersAnd BRAC Annual training Savings -10,875,000 training dollars

# AR Skilled Soldiers travel > 150mi = 24,000 24,000 soldiers# BRAC Soldiers travel > 150mi = 5000 5,000 soldiersAvg Travel Reimbursement Cost = $1,500 1,500 dollarstotal annual travel reimburse cost 43,500,000 travel dollarsInflation 2% per year

COA #4 AR soldiers = 205,000 205,000 soldiersReimburse Training cost 75,000 per soldier annually 75,000 dollarsBRAC only Reduced Attrition rate = 0.5% 25 soldiers

Annual training Savings -1,875,000 training dollars# BRAC Soldiers travel > 150mi = 5000 5,000 soldiersAvg Travel Reimbursement Cost = $1,500 1,500 soldierstotal annual travel reimburse cost 7,500,000 dollarsInflation 2% per year

BENEFIT

Training Cost Savings

COA #1Status quo: No Reimbursement for travelling >150 miles

COA #2Reimburse all Soldiers travelling >150 miles

COA #3 Reimburse critical and BRAC Soldiers travelling >150 miles

COA #4Reimburse only BRAC Soldiers travelling >150 miles

QUANTIFIABLE1 year

10 yearsNone $19M

$205M$11M

$119M$2M

$21M

NONQUANTIFIABLE

None • Increased Operational Readiness• Enhance ARFORGEN• Increased Soldier morale

• Increased Operational Readiness• Enhance ARFORGEN• Increased Soldier morale

• Increased Operational Readiness• Enhance ARFORGEN• Increased Soldier morale

5. Identify Quantifiable and Non-quantifiable Benefits


Case Study


6. Define Alternative Selection Criteria

- Cost of travel reimbursement 1 year- Cost of Travel reimbursement 10 years- Training Cost Savings 1 year- Training Cost Savings 10 years- Soldier morale, value perception, and

personal finance stability- Improved Operational Readiness and

enhancement to ARFORGEN


7. Compare AlternativesDecision Matrix

Criteria Weight Data Rank Score Data Rank Score Data Rank Score Data Rank ScoreTravel Reimburse Cost (+) 1 yr 10% 0.0 4 0.4 75.0 1 0.1 43.5 2 0.2 7.5 3 0.3

Travel Reimburse Cost (+) 10 yrs 20% 0.0 4 0.8 821.2 1 0.2 476.3 2 0.4 82.1 3 0.6

Training Cost Savings(-) 1 yr 10% 0.0 1 0.1 -18.8 4 0.4 -10.9 3 0.3 -1.9 2 0.2

Training cost Savings(-) 10 yrs 20% 0.0 1 0.2 -205.3 4 0.8 -119.1 3 0.6 -20.5 2 0.4

Morale / Good Will 20% 1 0.2 4 0.8 3 0.6 2 0.4

Operational Readiness 20% 1 0.2 4 0.8 3 0.6 2 0.4

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

100% 1.9 3.1 2.7 2.3

Best 4Acceptable 3Marginal 2Worst 1

COA #4

Rankings

COA #1 COA #2 COA #3No Travel Reimbursement Reimburse All Reimburse Critical and BRAC Reimburse BRAC only


8. Report Results and Recommendations

Executive Summary

The Army Reserve is considering reimbursing AR soldiers that must travel greater than 150 miles to Battle Assembly.

Four Courses of Action (COAs) were developed to determine if travel reimbursement to BA is feasible

All COAs require additional resources as travel costs are only partially offset by training cost savings.

Recommendation: Implement COA #2: Reimburse all AR Soldiers traveling greater than 150 miles to Battle Assembly

•Cost to implement COA 2:•Travel Cost s: FY12 $75M FY12-21 $821.2M•Training Cost Savings: FY 12 $18.8M FY12-21 $205.3M •Net ARC Costs: FY12 $ 56.2M FY12-21 $615.9M

Documents

Developed based on information provided by Mr. Mario F. Wozniak Chief, Reserve Personnel Army (RPA), Budget Division US Army Reserve Command G8 Author: