Relocation of Non-Nuclear Production to an Alternate Location Business Case October 18, 2007 Revision 2 Prepared for U.S. Department of Energy National Nuclear Security Administration Defense Programs Office of Transformation Prepared by Science Applications International Corporation This Page Intentionally Blank. Revision 2 October 2007 RECORD OF CHANGES REV 1 TO REV 2 - Changed document date from September 20th to October 18th, 2007. - Reorganized Executive Summary for greater clarity. - Added an acronyms list. - Made minor editorial cleanups. REV 0 TO REV 1 - Changed document date from September 17th to September 20th, 2007. - Added the alternative showing the Status Quo, Continue Current Facility Operations, in Table ES-1 and Table 6. - Changed “Annualized FY06 Dollars” to “Constant FY06 Dollars” in Table ES-1, Table 3 and Table 6. - Changed interpretation of the breakeven point from the 95th percentile, of the range of assumptions, based on linear interpolation of the data, to the 99.58th percentile of the range of assumptions, based on simulations that showed the nonlinearity of data in that region. - Adjusted the text to better define the base case and median values for the model results. - Added the opinion letter from TechSource, Incorporated as Appendix 6. Revision 2 October 2007 This Page Intentionally Blank. Revision 2 October 2007 Relocation of Non-Nuclear Production to an Alternate Location Business Case TABLE OF CONTENTS List of Figures..............................................................................................................................................iii List of Tables ...............................................................................................................................................iii Executive Summary..................................................................................................................................... iv 1.0 Introduction ....................................................................................................................................... 1 1.1 Study Objective ....................................................................................................................... 1 1.2 Approach ................................................................................................................................. 2 1.2.1 Location Selection ..............................................................................................................2 1.2.2 Business Case Model .......................................................................................................... 2 2.0 Relocation Scenario........................................................................................................................... 3 2.1 Facility Construction and Occupation..................................................................................... 3 2.2 Production Resumption ...........................................................................................................3 2.3 Personnel ................................................................................................................................. 3 3.0 Alternative City Selection ................................................................................................................. 5 3.1 Benefits.................................................................................................................................... 5 3.2 Costs ........................................................................................................................................ 5 4.0 Quantifying Benefits ......................................................................................................................... 9 5.0 Quantifying Costs............................................................................................................................ 11 5.1 Nonrecurring Costs................................................................................................................ 11 5.1.1 Moving Costs....................................................................................................................12 5.1.2 Personnel Costs – Initial Staffing ..................................................................................... 12 5.1.3 Delay costs........................................................................................................................ 12 5.2 Recurring Costs ..................................................................................................................... 13 5.2.1 Lease Costs ....................................................................................................................... 13 5.2.2 Operating Costs.................................................................................................................14 6.0 Quantitative Results......................................................................................................................... 15 6.1 Business Case Model.............................................................................................................15 6.2 KCRIMS to Albuquerque Risk Adjusted Results ................................................................. 16 6.3 Business Case Comparisons.................................................................................................. 18 7.0 Discussion of Sensitivity Analysis Results ..................................................................................... 21 7.1 Production Volume................................................................................................................ 21 7.2 Outsourcing Percent .............................................................................................................. 22 7.3 Legacy Remediation..............................................................................................................22 7.4 Annual Transportation...........................................................................................................22 7.5 Continuity of Critical Operations .......................................................................................... 23 7.6 Moving Costs ........................................................................................................................ 23 7.7 Employee Willingness to Relocate........................................................................................ 23 7.8 Regulatory Framework.......................................................................................................... 23 7.9 Community Acceptance ........................................................................................................ 24 7.10 Life Extension Program (LEP) Strategy................................................................................ 24 7.11 Reliable Replacement Warhead (RRW) Strategy ................................................................. 24 7.12 Stockpile Size, and Composition and Technology................................................................ 24 7.13 Weapon Activity Budgets...................................................................................................... 24 Revision 2 i October 2007 Relocation of Non-Nuclear Production to an Alternate Location Business Case 8.0 Risk Identification ........................................................................................................................... 25 8.1 Viability of the Build-Ahead Plan......................................................................................... 25 8.2 Early Attrition at KCP........................................................................................................... 25 8.3 Implementation Challenges................................................................................................... 25 8.4 Distant Location Planning ..................................................................................................... 25 8.5 Greenfield Site Availability................................................................................................... 26 8.6 Viability of On-Site Facility Scenario................................................................................... 26 8.7 Lost Commercialization Potential ......................................................................................... 26 8.8 Capturing Regional Savings.................................................................................................. 26 8.9 Increased Near-Term Negative Cash Flow ........................................................................... 27 8.10 Deferred Maintenance (RTBF and FIRP) ............................................................................. 27 Appendix 1 – Alternate Location Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis 29 Appendix 2 – City Desirability Analysis .................................................................................................... 31 Appendix 3 – Scenario Assumptions.......................................................................................................... 37 Spectrum of Alternatives................................................................................................................. 37 Appendix 4 – Business Case Model ........................................................................................................... 39 Description of the Business Case Model........................................................................................