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    How is the cost of sustainment calculated for the system? Does the 20 year clock start for each system at time of its fielding year, or does it start when the last system is fielded. The latter would suggest that the total service life is therefore 28 years.


    Answer

    Your question uses more than one phrase for "costs", so clarity requires a granular definition, available in the Defense Acquisition Guidebook (DAG), https://dag.dau.mil/Pages/default.aspx

    For a defense acquisition program, "life-cycle cost" (LCC) consists of research and development costs, investment costs, operating and support costs, and disposal costs over the entire life cycle. These costs include not only the direct costs of the acquisition program but also indirect costs.  In this way, all costs that are logically attributed to the program are included, regardless of funding source or management control, and this cost calculation is spoken of as the sum of the following four major cost categories, where each category is associated with sequential but overlapping phases of the program life cycle:

      1. Research and Development costs - associated with the Materiel Solution Analysis phase, the Technology Maturation and Risk Reduction phase, and the Engineering and Manufacturing Development phase.
      2. Investment costs - associated with the Production and Deployment phase.
      3. Operating and Support costs - associated with the Sustainment phase.
      4. Disposal costs - those occurring after initiation of system phase out or retirement, including demilitarization, disposal, or long-term waste storage.

    The concept of life cycle costs is clearly illustrated in the DAG in Figure 3.1.2.F1, visually depicting a notional profile of annual program expenditures by cost category over the system life cycle, and each of those comprehensive categories is further explained in subsequent paragraphs in the same DAG chapter.

     
    There is also the related concept of "total ownership cost" (TOC), a term frequently - but erroneously - used synonymously.  TOC is broader in scope than LCC and includes the elements of life-cycle cost as well as other infrastructure or business process costs not normally attributed to the program. In this definition, "infrastructure" is used in the broadest possible sense and consists of all activities that sustain the assigned military forces, to include costs such as support to equipment (acquisition and central logistics activities), support to military personnel (training, personnel administration and benefits, and medical care), and support to military bases (communications/ infrastructure).
     
    In general, traditional life-cycle cost estimates are often adequate in scope to support the review and oversight of cost estimates made as part of the acquisition system, but depending on the issue at hand, the broader perspective of total ownership cost may be more appropriate when the life-cycle cost perspective is too narrow to deal with the particular context.  One of the more important situations when the more comprehensive measure may be desirable is when tradeoff analyses are completed for energy-intensive systems, in which case Fully Burdened Cost of Energy (FBCE) estimates, including the energy-related costs to sustain specific pieces of equipment, including procurement of energy, the logistics needed to deliver it where and when needed, related infrastructure, and force protection for those logistics forces directly involved in energy delivery would be a part of the TOC. 
     
    One part of your question also mentioned sustainment costs specifically, which are defined and discussed in Defense Acquisition Guidebook (DAG) chapter 3, paragraph 3.7.1.3. "Operating and Support (O&S) Cost Element Structure". Sustainment costs, sometimes referred to as O&S costs, would be only one part of the life-cycle costs calculation - although potentially a very large part, as commonly as much as 2/3 of total costs may be accrued during this system life cycle phase.
     
    A first step then would be to clarify what costs calculation is intended, ensuring all users share a common definition. More information on sustainment costs specifically is available in the Operating and Support Cost-Estimating Guide (http://dcarc.cape.osd.mil/Files/CSDRSR/OS_Guide_v9_March_2014.pdf), created to assist in developing estimates of O&S costs, and used in conjunction with the procedures for Service life-cycle (and total ownership) cost estimates contained in DoD Manual 5000.4-M, "DoD Cost Analysis Guidance and Procedures"  (https://dap.dau.mil/policy/Lists/Policy Documents/DispForm.aspx?ID=2160) and the DoDI 5000.02, "Operation of the Defense Acquisition System" (http://www.acq.osd.mil/docs/DSD 5000.02_Memo Doc.pdf).  A simple breakdown of the various similar cost calculations and terms may be found in the DAU "Life Cycle Management (LCM)" ACQuipedia article (https://dap.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=668c5618-5c46-4180-87d9-74f94ff7e5ab).
     
    Secondly, there is the issue of "service life" definition. If the CPD does not define it for that particular increment, the simplest, most common definition might be "...the period of time an asset is in economical use", or as the DAU Glossary puts it, "...the average or mean life of the item...the mean life between overhauls, mandatory replacement time, or the total usefulness of the item in respect to the weapon it supports, that is, from first inception of the weapon until final phase out."  There is no generally accepted DOD formula for the computation. Similarly, a weapons system life cycle is defined as "All phases of the system’s life including research, development, test, and evaluation (RDT&E); production; deployment (inventory); operations and support (O&S); and disposal." These or similar phrases are used throughout Life-cycle logistics, including in defining the Program Manager's life cycle responsibilities and are generally considered to include the system's life span in its entirety, from prior to Milestone A, through complete demilitarization and disposal.
     
    In summary, terms such as "costs" and "service life" may have somewhat different meanings depending on context. If the intent and definitions of these measures are not already defined in the CPD you mentioned or other program documents, then is it important that they be quantified in all respects and that all users share a common understanding of the metrics as you've defined them for that increment. 
     
    If desired, more information on the myriad DAU training courses and continuous learning modules covering risk analysis, cost estimating and cost analysis may be found at http://icatalog.dau.mil/These include:
    •BCF 106 -- Fundamentals of Cost Analysis
    •BCF 107 -- Applied Cost Analysis
    •BCF 204 -- Intermediate Cost Analysis
    •BCF 206 -- Cost/Risk Analysis
    •BCF 208 -- Software Cost Estimating
    •BCF 215 -- Operating and Support Cost Analysis
    •CLB 007 - - Cost Analysis
    •CLM 016 - - Cost Estimating
    •CLB 024 - - Cost Risk Analysis Introduction



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