Operating and Support Costs

1
Operating and Support Costs

• Chapter 18

2
OS Costs

• DoD is not in business to generate a profit
• What we need we get
• OS costs have been poorly monitored
• There has been no effective cost accounting
  system for OS costs
• Operating and Support Costs are frequently the
  largest component of life cycle costs (LCC)
• Congress directed establishment of a system to
  track OS costs
• Visibility and Management of Operating and
  Support Costs (VAMOSC)

3
OS Costs

• Decisions made during the design stage often
  determine operating and support costs incurred
  following fleet introduction
• Engineers often have little or no 1st hand
  knowledge of operations and support and little
  incentive to minimize LCC
• Emphasis is on performance more than reliability
  and maintainability
• Contractors ultimate concern is maximization of
  profit
• Profit is maximized by minimization of production
  costs, not minimization of operating and support
  costs

4
Estimation of OS Costs

• Objective is to quantify relevant costs that
  should be incurred by a weapon system under the
  OS conditions specified for the system
• Not a direct estimate of future budget
  expenditures, only an estimate of expenditures
  that would be incurred under normal operating
  expenditures
• If assumptions regarding operating conditions
  change, the cost estimate must reflect those
  changes
• system characteristics may change as a result of
  design changes
• deployment tactics may change in response to
  performance achieved, new threats
• support policies (manning, frequency of
  inspections, etc.) may change
• changes in intensity of operations will affect
  consumption of fuel, spare parts, frequency of
  maintenance, etc.

5
Generic OS CES