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Tr-Sas-076-All NORTH ATLANTIC TREATY RESEARCH AND TECHNOLOGY ORGANISATION ORGANISATION AC/323(SAS-076)TP/430 www.rto.nato.int RTO TECHNICAL REPORT TR-SAS-076 NATO Independent Cost Estimating and the Role of Life Cycle Cost Analysis in Managing the Defence Enterprise (Estimation indépendante des coûts de l’OTAN et rôle de l’analyse des coûts globaux de possession au sein de l’OTAN) This Report presents the findings of Task Group SAS-076. Published August 2012 Distribution and Availability on Back Cover NORTH ATLANTIC TREATY RESEARCH AND TECHNOLOGY ORGANISATION ORGANISATION AC/323(SAS-076)TP/430 www.rto.nato.int RTO TECHNICAL REPORT TR-SAS-076 NATO Independent Cost Estimating and the Role of Life Cycle Cost Analysis in Managing the Defence Enterprise (Estimation indépendante des coûts de l’OTAN et rôle de l’analyse des coûts globaux de possession au sein de l’OTAN) This Report presents the findings of Task Group SAS-076. The Research and Technology Organisation (RTO) of NATO RTO is the single focus in NATO for Defence Research and Technology activities. Its mission is to conduct and promote co-operative research and information exchange. The objective is to support the development and effective use of national defence research and technology and to meet the military needs of the Alliance, to maintain a technological lead, and to provide advice to NATO and national decision makers. The RTO performs its mission with the support of an extensive network of national experts. It also ensures effective co-ordination with other NATO bodies involved in R&T activities. RTO reports both to the Military Committee of NATO and to the Conference of National Armament Directors. It comprises a Research and Technology Board (RTB) as the highest level of national representation and the Research and Technology Agency (RTA), a dedicated staff with its headquarters in Neuilly, near Paris, France. In order to facilitate contacts with the military users and other NATO activities, a small part of the RTA staff is located in NATO Headquarters in Brussels. The Brussels staff also co-ordinates RTO’s co-operation with nations in Middle and Eastern Europe, to which RTO attaches particular importance especially as working together in the field of research is one of the more promising areas of co-operation. The total spectrum of R&T activities is covered by the following 7 bodies: • AVT Applied Vehicle Technology Panel • HFM Human Factors and Medicine Panel • IST Information Systems Technology Panel • NMSG NATO Modelling and Simulation Group • SAS System Analysis and Studies Panel • SCI Systems Concepts and Integration Panel • SET Sensors and Electronics Technology Panel These bodies are made up of national representatives as well as generally recognised ‘world class’ scientists. They also provide a communication link to military users and other NATO bodies. RTO’s scientific and technological work is carried out by Technical Teams, created for specific activities and with a specific duration. Such Technical Teams can organise workshops, symposia, field trials, lecture series and training courses. An important function of these Technical Teams is to ensure the continuity of the expert networks. RTO builds upon earlier co-operation in defence research and technology as set-up under the Advisory Group for Aerospace Research and Development (AGARD) and the Defence Research Group (DRG). AGARD and the DRG share common roots in that they were both established at the initiative of Dr Theodore von Kármán, a leading aerospace scientist, who early on recognised the importance of scientific support for the Allied Armed Forces. RTO is capitalising on these common roots in order to provide the Alliance and the NATO nations with a strong scientific and technological basis that will guarantee a solid base for the future. The content of this publication has been reproduced directly from material supplied by RTO or the authors. Published August 2012 Copyright © RTO/NATO 2012 All Rights Reserved ISBN 978-92-837-0162-0 Single copies of this publication or of a part of it may be made for individual use only. The approval of the RTA Information Management Systems Branch is required for more than one copy to be made or an extract included in another publication. Requests to do so should be sent to the address on the back cover. ii RTO-TR-SAS-076 Table of Contents Page List of Figures viii List of Tables xi List of Acronyms xiv Acknowledgements xviii SAS-076 Membership List xix Executive Summary and Synthèse ES-1 1.0 Introduction 2 1.1 Background 2 1.2 Provenance and Approval 2 1.3 Objectives 3 1.4 Scope 4 2.0 Approach 6 2.1 Independent Cost Estimates 6 2.2 Role of Life-Cycle Cost Analysis in Managing the Defense Enterprise 7 3.0 Summary of Results 7 3.1 ICE on NATO Alliance Ground Surveillance System (AGS) 7 3.2 ICE on Royal Netherlands Navy LPDs 8 3.2.1 Acquisition ICE 8 3.2.2 Operational & Support ICE 11 3.3 Role of Life-Cycle Cost Analysis in Managing the Defense Enterprise 12 4.0 Lessons Identified 14 4.1 Main ICE Lessons and Related SAS-076 Experience 14 4.1.1 Establishing Needs with Customers 14 4.1.2 Establishing a Program Baseline 14 4.1.3 Developing Baseline Cost Estimates 15 4.1.4 Conducting Risk and Uncertainty Analysis 15 4.1.5 Verifying and Validating Estimates 15 4.1.6 Presenting and Defending Estimates 16 4.2 Other ICE Lessons 16 4.3 Life Cycle Cost Analysis in Managing the Defense Enterprise 17 5.0 Conclusions 18 6.0 References 20 RTO-TR-SAS-076 iii Annex A – Estimating the Acquisition Cost of the Alliance Ground Surveillance A-1 (AGS) System 1.0 Introduction A-2 1.1 Historical Background A-2 1.2 AGS Core Overview A-2 1.3 Study Objective A-4 1.4 Scope A-4 1.5 Outline A-4 2.0 The AGS Program Baseline A-6 2.1 General Assumptions A-6 2.2 The Cost Breakdown Structure (CBS) A-6 2.2.1 The Air Vehicle Segment A-7 2.2.2 The Payload Segment A-8 2.2.3 The Ground/Support Segment A-8 2.2.4 Miscellaneous Support Elements 1.4 – 1.12 A-8 3.0 Financial Considerations A-9 3.1 Inflation A-9 3.2 Raw Aircraft Procurement A-9 3.3 Weighted Aircraft Procurement A-9 3.4 Foreign Exchange Rate A-10 4.0 The AGS Cost Estimate A-12 4.1 The Air Vehicle A-12 4.1.1 The Airframe Wing A-13 4.1.2 The Airframe Fuselage A-15 4.1.3 The Airframe Empennage A-16 4.1.4 The Airframe Subsystems A-17 4.2 Global Hawk Propulsion A-18 4.3 Communications A-18 4.3.1 Datalinks A-19 4.3.2 Ku Band Satellite Radio A-19 4.3.3 Satellite Communications (SATCOM) Voice A-20 4.3.4 International Maritime SATCOM A-21 4.3.5 UHF/VHF Communications A-22 4.4 Navigation/Guidance A-23 4.4.1 Global Positioning Systems (GPS) A-24 4.4.2 OmniStar Differential Global Positioning System (DGPS) A-24 4.4.3 IFF Transponder/Traffic Alert & Collision (TCAS-II) A-24 4.4.4 Worldwide Operations Hardware Suite A-26 4.5 Miscellaneous Air Vehicle Components A-26 4.5.1 The Central Computer A-26 4.5.2 Auxiliary Equipment A-27 4.5.3 Integration, Assembly, Test & Checkout (IATC) A-28 4.6 The Payloads A-28 4.6.1 Multi-Platform Radar Technology Insertion Program (MP-RTIP) A-28 4.7 The Ground/Support Segment A-30 4.7.1 AGS Ground Segment Parametric Cost Estimation A-31 iv RTO-TR-SAS-076 4.7.2 Ground Segment Hardware A-31 4.7.3 Sample Calculation: VHF/UHF Antenna A-32 5.0 Risk and Uncertainty Analysis for NATO AGS A-36 5.1 Background A-36 5.2 Point Estimate and Position on S-Curve A-36 5.3 Risk Elements A-36 5.4 Selection of CV A-39 5.5 Scenarios A-40 5.6 S-Curve A-41 5.7 S-Curve Excursion A-42 6.0 Conclusions A-43 7.0 References A-44 Appendix A-1: A General Overview of the Advanced Cost Estimating Systems (ACES) A-46 Appendix A-2: ACES Input and Output Parameter Definitions A-48 Annex B1 – Estimating the Acquisition Cost of the Royal Netherlands Navy B1-1 Landing Platform Dock Ships: An Ex Post Analysis 1.0 Introduction B1-2 1.1 Background B1-2 1.2 Objective B1-3 1.3 Scope B1-3 1.4 Outline B1-3 2.0 Data B1-3 2.1 Technical Data B1-6 2.2 Cost Data B1-8 3.0 Parametric Cost Estimation B1-10 3.1 The M5 Model Tree System B1-11 3.1.1 Discussion B1-12 3.2 Application to SAS-076 Ship Data Set B1-12 3.2.1 Comparison to Linear Regression Models B1-18 4.0 Cost Estimation by Analogy B1-19 4.1 Hierarchical Cluster Analysis B1-19 4.2 Application to SAS-076 Ship Data Set B1-19 4.3 Discussion B1-26 5.0 Results B1-27 5.1 M5 Model Tree Results B1-27 5.2 Linear Regression Results B1-29 5.3 Hierarchical Cluster Analysis Results B1-29 5.4 Discussion B1-32 5.5 Ex Post Revelation B1-32 6.0 Lessons Identified B1-34 6.1 General Management of the Estimating Process B1-34 6.2 Definition of the Aims and Cost Boundary B1-36 6.3 Data and Assumptions B1-36 6.4 Methods, Models and Tools B1-37 6.5 Risk and Uncertainty Analysis B1-38 6.6 Analysis and Presentation of Results B1-38 RTO-TR-SAS-076 v 7.0 Conclusion B1-39 8.0 References B1-41 Appendix B1-1: Data Set B1-43 Appendix B1-2: Principal Component Data Set B1-53 Appendix B1-3: M5 Model Tree Algorithm B1-54 Annex B2 – Estimating the Operation and Support Costs of the Royal B2-1 Netherlands Navy Landing Platform Dock Ships: An Ex Ante Analysis 1.0 Introduction B2-2 1.1 Background B2-2 1.2 Objective B2-2 1.3 Scope B2-2 1.4 Outline B2-2 2.0 Methodology B2-3 2.1 Analogy Method B2-3 2.2 Parametric Method B2-3 2.3 Engineering “Bottom-up” Method B2-3 3.0 Tools B2-4 4.0 Data and Assumptions B2-4 4.1 Analogy and Parametric B2-5 4.2 Engineering Bottom-up B2-5 4.2.1 Organizational and Operational Data B2-5 4.2.2 Technical Data B2-12 4.2.3 Indirect Support B2-20 5.0 Cost Normalization B2-20 6.0 Results and Analysis B2-20 7.0 Comparing CAIG and GCBS Models
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