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SHOULD-COST TEMPLATE See notes pages on subsequent slides for key points and tailor format as appropriate to suit the particular initiatives of program.

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Presentation on theme: "SHOULD-COST TEMPLATE See notes pages on subsequent slides for key points and tailor format as appropriate to suit the particular initiatives of program."— Presentation transcript:

1 SHOULD-COST TEMPLATE See notes pages on subsequent slides for key points and tailor format as appropriate to suit the particular initiatives of program.

2 Should Cost Presentation Template
The Program’s “should cost” is the set of program’s initiatives or opportunities to reduce costs below the Independent Cost Estimate (ICE) level. It is primarily the basis for a negotiating position and result for pending contracts that will be below the ICE, but it also includes measures taken to reduce cost beyond near term contract actions. See AT&L guidance memos on developing should-cost positions (https://portal.acq.osd.mil/portal/server.pt?open=17&objID=106417&mode=2&cached=true): “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending,” September 14, 2010 “Implementation Directive for Better Buying Power – Obtaining Greater Efficiency and Productivity in Defense Spending,” November 3, 2010 “Implementation of Will-Cost and Should-Cost Management,” April 22, 2011 “Should-Cost and Affordability,” August 24, 2011 The following charts provide a notional guide for presenting a summary of a program’s “should cost” plans and estimates for various program activities; see slide notes pages for key points and tailor format as appropriate to suit the particular initiatives of program. See notes pages on subsequent slides for key points and tailor format as appropriate to suit the particular initiatives of program.

3 Program Should-Cost Summary Example
Highlight phase being entered Acquisition Milestones MS B CDR MS C FRP Pre-EMD This chart is an example of how a summary of should-cost initiatives could look from a funding impact perspective. Should-Cost estimates are established for each Milestone/DAB. The cost summary compares the Will Cost estimate (usually the ICE) for the program phases (or some other logical top-level categories/subprograms) with the current roll-up of should-cost estimates for those phases (or categories/subprograms). The phase being entered is the primary focus of attention and it is understood that the potential savings of potential initiatives in later years are very notional. While the majority of the table representing the Should-Cost projections remains static between Milestones, the “Actuals/New Estimate” line provides updates to actual prior costs and updated future projections” for subsequent DAES reviews, OIPTs, etc. A top-level program schedule may accompany the funding summary and activities with the key Should-Cost initiatives may be highlighted. Risk Reduction EMD Sys Integration Labs Flight Test Production AV Risk Reduction GS Risk Reduction RFP CA EMUs Govt SIL Combined DT/OT IOT&E OA-1 OA-2 Key Should-Cost Opportunities RFP LRIP 1 RFP LRIP 2

4 Program Should-Cost Summary Example
Should Cost Initiatives: EMD Initiative 1: Short description and basis for Should-Cost Estimate savings Initiative 2: Short description and basis for Should-Cost Estimate savings Initiative 3: Short description and basis for Should-Cost Estimate savings Production & Deployment (notional) Initiative 1 Initiative 2 Operations and Support (notional) Other This chart continues the summary of the program’s should-cost initiatives For each program phase/category/subprogram list the developed (or envisioned) should-cost initiatives with a brief description of each. Again, the phase being entered should be the primary focus of attention.

5 P-8A Should Cost Opportunities Map Identification and Prioritization
Operations and Support LRIP 1-3 Full Rate Production Alternatively, the planned/envisioned initiatives could be presented pictorially or graphically FOUO

6 EMD Should-Cost Estimate Example
One slide for each major S-C initiative in EMD phase EMD Should-Cost Estimate Example Key Events/Schedule (Plan): Event and Target Date Short description Initiative Name: Short Narrative Description of Basis for Should Cost Estimates: (List reasons should cost estimate is below will cost, with dollar impact) Adjustments and Impacts to Spend Plan Contract Implications Incentive/fee structure, timing of evaluations & savings realized Risks List risks to achieving these savings Progress Update/Results: Key events accomplished / not accomplished / reason A chart with this type of detailed content should be provided for each major should-cost initiative that has been developed for the phase the program is entering. Key elements include: Should-Cost estimate of target activity/process compared with Will Cost for that activity/process as well as Will Cost for entire program (this provides an indication of how significant the savings are in the context of the entire program). Example shows Acquisition Will Cost, but initiatives could highlight O&S savings as well or instead. Focus on near term costs/savings of initiative but inclusion of Total for all years. Description of initiative with basis for achieving savings Spend plan with phasing of key obligations and outlays and decision points when savings could be realized. Contract methods and timing involved Primary risks to executing plan Schedule to show key events that must take place to execute the initiative and aid in assessing progress Progress Update section: This section would be updated for each subsequent review of the program’s Should-Cost initiatives.

7 Production Should-Cost Estimate Example
One slide for each major S-C initiative in Production phase Production Should-Cost Estimate Example Key Events/Schedule (Plan): Event and Target Date Short description Initiative Name: Short Narrative Description of Basis for Should Cost Estimates: (List reasons should cost estimate is below will cost, with dollar impact) Adjustments and Impacts to Spend Plan Contract Implications Incentive/fee structure, timing of evaluations & savings realized Risks List risks to achieving these savings Progress Update/Results: Key events accomplished / not accomplished / reason A chart with this type of detailed content should be provided for each major should-cost initiative that has been developed for the phase the program is entering. Key elements include: Should-Cost estimate of target activity/process compared with Will Cost for that activity/process as well as Will Cost for entire program (this provides an indication of how significant the savings are in the context of the entire program). Example shows Acquisition Will Cost, but initiatives could highlight O&S savings as well or instead. Focus on near term costs/savings of initiative but inclusion of Total for all years. Description of initiative with basis for achieving savings Spend plan with phasing of key obligations and outlays and decision points when savings could be realized. Contract methods and timing involved Primary risks to executing plan Schedule to show key events that must take place to execute the initiative and aid in assessing progress Progress Update section: This section would be updated for each subsequent review of the program’s Should-Cost initiatives

8 Ops & Support Should-Cost Estimate Example
One slide for each major S-C initiative in Sustainment phase Ops & Support Should-Cost Estimate Example Key Events/Schedule (Plan): Event and Target Date Short description Initiative Name : Short Narrative Description of Basis for Should Cost Estimates: (List reasons should cost estimate is below will cost, with dollar impact) Adjustments and Impacts to Spend Plan Contract Implications Incentive/fee structure, timing of evaluations & savings realized Risks List risks to achieving these savings Progress Update/Results: Key events accomplished / not accomplished / reason A chart with this type of detailed content should be provided for each major should-cost initiative that has been developed for the phase the program is entering. Key elements include: Should-Cost estimate of target activity/process compared with Will Cost for that activity/process as well as Will Cost for entire program (this provides an indication of how significant the savings are in the context of the entire program). Example shows Acquisition Will Cost, but initiatives could highlight O&S savings as well or instead. Focus on near term costs/savings of initiative but inclusion of Total for all years. Description of initiative with basis for achieving savings Spend plan with phasing of key obligations and outlays and decision points when savings could be realized. Contract methods and timing involved Primary risks to executing plan Schedule to show key events that must take place to execute the initiative and aid in assessing progress Progress Update section: This section would be updated for each subsequent review of the program’s Should-Cost initiatives

9 Other Cost Savings Initiatives
(List other steps the program is taking to reduce total government will cost, with dollar impact) Alternate slide formats may be used for initiatives that cannot be assessed in terms of fiscal-year savings


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