uncovering the mysteries of mod support costs - … the mysteries of mod support costs neil morrill...

Uncovering the Mysteries of MoD Support Costs

Neil Morrill - Dstl

Steve Robinson – Galorath

19 March 2009

© Dstl 200925 March 2009 Dstl is part of the

Ministry of DefenceUNCLASSIFIED

Dstl key facts• Part of the Ministry of Defence

• Formed in 2001 when remainder of the Defence Evaluation and Research Agency was reconstituted as a Government-owned company (QinetiQ) in preparation for privatisation

• Dstl’s mission:

Creating the winning edge for UK Forces and Government through the best use of science and technology

• 3500 staff (including 100 military)

• Operates as a Government Trading Fund (ie 100% ‘contract’funded), turnover £380 million



Dstl’s role• Trusted in-house analysis and advice

• Research– in particularly sensitive areas

– or where deep understanding needed for defence purposes

• Knowledge integration– based on global science and technology

• Focus for international research collaboration– government to government

• Dstl does not undertake commercial contracts unless directed to do so by MOD



Scope of Analysis within Dstl

PolicyPolicy

OperationsOperations

ProcurementProcurement

“To support MOD in making the best policy,procurement and operational decisions”

~ 50%

~ 25%

~ 25%

Approximate balance of analytical effort

(people and money)



Personnel

Scope of operational analysis in Dstl

Overall force

structureLogistics & support

Operations & training

Capability Balance-of-Investment

Equipment acquisition

Policy

Strategic analysis



Manning, Training and Costs (MTC) Team• Formed in April 2007 from the Manning Team and Cost

Analysis team.

• Expanded to include training to enable us to provide analytical support across more of the ‘other’ Defence Lines of Development (DLOD).

• Role: – Develop the tools, techniques and networks to provide scientificadvice to support high level manpower and training decisions.

– To provide cost estimates, analytical support, advice and guidance to customers, and to provide/develop the tools, techniques and processes to do so.



What is a BOI?• Balance of Investment: The way in which resources are

allocated to competing demands to most cost-effectivelyachieve one or more desired capabilities

Examples:

• between different systems for countering enemy armour– e.g. infantry-deployed anti-tank weapons, tanks, artillery systems, mines,

fixed-wing aircraft, attack helicopters

• between alternative ways of improving personnel retention– e.g. improving pay, improving living accommodation, long-service

incentives, etc



General BOI Methodology

ScenariosScenariosScenariosScenariosScenarios and

CampaignsScenarios and

Campaigns

Scenario Characterisation

Scenario Characterisation

Capability Requirements

Capability Requirements

System OptionsSystem OptionsCost-Effectiveness

AnalysisCost-Effectiveness

Analysis

Cost Effective Force Mix(es)Cost Effective Force Mix(es)

CostsCosts

Additional Requirements

Additional RequirementsTools:

Mathematical Programmes,

Exhaustive methods etc

Tools:

Mathematical Programmes,

Exhaustive methods etc

EAC or NPV

Fixed cost and variable cost

EAC or NPV

Fixed cost and variable cost

Support Cost Study -Example



Support Cost Study

• Aim – To understand if readily available data sources provide adequate information to conduct BoI analysis

• Approach – Engage with relevant Integrated Project Team’s and stakeholders to obtain additional understanding and information

• Output – Conclusions and Recommendations based on findings of analysis

• Case Study – Independent cost analysis of Future Lynx using SEER-H



Costs in Then Year (RAB)

Costs in Cash

Through Life Cost ProcessOther DLOD’s

Later Year Costs

(Beyond Yr10)

BoI Capability

Costs Through Life

Planning Round

Equipment

ProcurementAssumptions

Multi Eqpt IPTSingle Eqpt IPT

High Level

Support Costs

OutputPlatform

10 Yr Detailed

Support Costs



Candidate Projects



Overall AnalysisSupport Costs by Equipment/Platform

AMR

AAM

BCIP

Bulld

og

Chi

nook

Cut

lass

GM

LRS

GSV

Her

cule

s

JCA

Lynx

Pum

a

Rea

per

Sent

ry E

3D

Soot

hsay

er

Spea

rfish

Stin

gray

Traf

alga

r

Type

23

Type

45

Typh

oon

VC10

War

rior

Wat

chke

eper

Percentage Allocation of PR09 Support Costs to Cost Record Categories

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%AM

RAA

M

BCIP

Bulld

og

Chi

nook

Cut

lass

GM

LRS

GSV

Her

cule

s

JCA

Lynx

Pum

a

Rea

per

Sent

ry E

3D

Soot

hsay

er

Spea

rfish

Stin

gray

Traf

alga

r

Type

23

Type

45

Typh

oon

VC10

War

rior

Wat

chke

eper

Not Mapped

Upkeep

Upgrade

Update

Procurement

Other

Fuels

Capital Spares



Lynx – Case Study



Lynx - Case Study

Establish what proportion is covered in the Equipment Support Plan (ESP)

• Discussions with Finance Branches of stakeholder organisations

– Data was not readily available

• Capitation Rates for existing Lynx aircraft– Excluded cost of money and depreciation– Based on assumptions made ESP covers between 22% and

44% – Operating cost of bases, fuel, training, operators (crew)



Future Lynx – SEER Case Study

• Equipment Breakdown consisting of:– Airframe– Hydraulic System– Fuel System– Landing Gear – Electrical System – Propulsion – Rotor System – Drive System – Flight Control – C3I – Navigation – Fire Control – Data Management – Weapon System




• SEER-H with the following assumptions:

– Life – 30 Yrs

– Number of Helos –Total number likely to be procured

– Utilisation – 1.5% to 3%




• Output from SEER-H– Support for procured aircraft:

• 50% probability - £2,900M• 80% probability - £5,500M

– Range of £100M - £185M per year through life

• Comparison between SEER-H and MoD Data– MoD data reasonable at the low to mid point of the SEER range



Study Outcome

• Observations– New process implemented

during FY09/10

– For BoI studies, possible risk of double counting

– Using Lynx as an example, ESCoM covers between 22-44% of capability WLC

– Independent check with SEER-H shows support at the lower end of the predicted range

• Conclusions– Readily available data not

sufficient to provide cost information for BoI studies

– Stakeholder involvement required for detailed analysis

• Recommendations– Future iterations with new

candidate projects

– Independent WLC analysis

Questions ?

uncovering the mysteries of mod support costs - … the mysteries of mod support costs neil morrill...

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