Contract Administration Services Study

Consolidation of the Department of Defense
Contract Administration Services
Business Case Analysis
May 14, 1999
Prepared by
Booz·Allen & Hamilton for
The Office of the Deputy Under Secretary of Defense
(Acquisition Reform)

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TABLE OF CONTENTS
TABLE OF CONTENTS..........................................................................................................ii
TABLE OF FIGURES..............................................................................................................v
Executive Summary ............................................................................................................ES-1
1 Introduction........................................................................................................................1
1.1 Statement of the Problem.............................................................................................1
1.2 Background and History of the CAS Consolidation Issue..........................................2
1.3 Rationale for Conducting a Business Case..................................................................4
1.4 Methodology.................................................................................................................5
1.4.1 Environmental Assessment.......................................................................................5
1.4.2 Data Collection........................................................................................................6
1.4.3 Alternatives Analysis................................................................................................6
1.4.4 Preferred Alternative & Recommendation ..............................................................12
2 Supervisor of Shipbuilding...............................................................................................13
2.1 Mission and Background...........................................................................................13
2.1.1 CAS Operations.....................................................................................................13
2.1.2 Organization and Responsibilities...........................................................................14
2.1.3 Recent Changes .....................................................................................................15
2.2 Definition of the SUPSHIP Status Quo.....................................................................16
2.3 Definition of the Alternative CAS Scenario ..............................................................17
2.3.1 Background ...........................................................................................................17
2.3.2 Assumptions ..........................................................................................................17
2.3.3 Functional Organization and Relationships .............................................................18
2.4 Comparison of the Alternatives.................................................................................19
2.4.1 Quantitative ...........................................................................................................19
2.4.2 Qualitative .............................................................................................................25
2.5 Recommendation........................................................................................................27
3 Office of Naval Research ..................................................................................................28

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3.1 Background and Mission...........................................................................................28
3.1.1 ONR Authority ......................................................................................................28
3.1.2 ONR Contract and Grant Post Award Administration Organization........................29
3.1.3 Current University Business Affairs Functions........................................................32
3.1.4 Changes in Operations Over Last 10 Years ............................................................34
3.2 Status Quo..................................................................................................................36
3.3 Alternative CAS Scenarios.........................................................................................36
3.4.1 Quantitative Comparison of Alternatives ................................................................36
3.4.2 Qualitative Comparison of Alternatives ..................................................................38
3.5 Recommendation........................................................................................................41
4 Army Ammunition Plants ................................................................................................42
4.1 Mission and Background...........................................................................................42
4.1.1 AAP Staffing .........................................................................................................43
4.1.2 Recent Downsizing ................................................................................................43
4.1.3 Acquisition Reforms...............................................................................................44
4.2 Definition of the Status Quo CAS Operations Performed at the AAPs ...................44
4.2.1 The Active AAPs...................................................................................................44
4.2.2 The Inactive AAPs.................................................................................................45
4.3.1 Issues, Assumptions, and Constraints .....................................................................46
4.3.2 Quantitative Comparison........................................................................................47
4.3.3 Qualitative Comparison..........................................................................................54
4.4 Recommendation........................................................................................................55
5 DFARS Clause 242.203(a)(i)(B) -- Allowing the Retention of Contract Administration...
...........................................................................................................................................57
Appendix A - FAR 42.302 Contract Administration Functions and DFARS 242.302
Contract Administration Functions .....................................................................................A-1
Appendix B - Sources of Information...................................................................................B-1
Appendix C - Overhead Rate Calculations..........................................................................C-1
Appendix D - SUPSHIP Workload Analysis........................................................................D-1

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Appendix E - SUPSHIP Detailed Cost Estimate and Basis of Cost Estimate.....................E-1
Appendix F - ONR Detailed Cost Estimate and Basis of Cost Estimate............................. F-1
Appendix G - Detailed AAP Information............................................................................ G-1
Appendix H - AAP Detailed Cost Estimate and Basis of Cost Estimate............................ H-1
Appendix I - Definitions.........................................................................................................I-1

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TABLE OF FIGURES
Figure ES-1 – Current CAS Effort ..............................................................................................1
Figure ES-2 – SUPSHIP Results.................................................................................................2
Figure ES-3 – ONR Results ........................................................................................................2
Figure ES-4 – Army Ammunition Plant Results...........................................................................3
Figure 1-1 Previous DoD Studies ................................................................................................3
Figure 1-2 Business Case Methodology Model............................................................................5
Figure 1-3 Names of Alternatives and Definitions........................................................................7
Figure 1-4 Cost Element Structure and Definitions......................................................................8
Figure 1-5 Weighted Criteria Used for Qualitative Analysis .......................................................11
Figure 1-6 Rankings of Evaluation Criteria................................................................................12
Figure 2-1 SUPSHIP Staffing....................................................................................................16
Figure 2-2 SUPSHIP Fiscal Year 1997 Workload......................................................................17
Figure 2-3 SUPSHIP Fiscal Year 1997 Total CAS Cost ............................................................17
Figure 2-4 Status Quo: New Construction and Repair CAS Workload at SUPSHIP ..................20
Figure 2-5 Comparison of Number of New Construction CAS Workyears for the Status Quo and
Alternative S-1A.................................................................................................................21
Figure 2-6 Comparison of Number of Repair CAS Workyears for the Status Quo and Alternative
S-1A...................................................................................................................................22
Figure 2-7 Comparison of Number of New Construction non-CAS Workyears for the Status Quo
and Alternative S-1A ..........................................................................................................23
Figure 2-8 Comparison of Number of Repair non-CAS Workyears for the Status Quo and
Alternative S-1A.................................................................................................................24
Figure 2-9 SUPSHIP Cost Comparison (10 Year Investment and Operations)...........................24
Figure 2-10 SUPSHIP Graphical Cost Comparison ...................................................................25
Figure 2-11 Weighted Value of Qualitative Factors ...................................................................25
Figure 2-12 Qualitative Comparison of CAS Alternatives ..........................................................26
Figure 3-1 ONR University Business Affairs Organization.........................................................30
Figure 3-2 ONR Regional Office Functions and Sub-functions...................................................33
Figure 3-3 ONR Regional Office Structure................................................................................34
Figure 3-4 ONR Cost Comparison (10 year Investment and Operations) ...................................37
Figure 3-5 ONR Graphical Cost Comparison.............................................................................38
Figure 3-6 Qualitative Results ...................................................................................................39
Figure 4-1 Active Plants' FAR Part 42 Functions/Subfunctions..................................................45
Figure 4-2 Inactive Plants' FAR Part 42 Functions/Subfunctions................................................46
Figure 4-3 Status Quo: Total CAS Full-Time Equivalent (FTE) – Active Plants ........................48
Figure 4-4 Status Quo: Total CAS FTEs – Inactive Plants.........................................................49
Figure 4-5 Alt 1A: Distribution of Total CAS FTEs – Active Plants ..........................................49
Figure 4-6 Alt A1A: Distribution of Total CAS FTEs – Inactive Plants......................................50
Figure 4-7 Alt A1B: Distribution of CAS FTEs – Active Plants.................................................51
Figure 4-8 Alt A1B: Distribution of CAS FTEs – Inactive Plants...............................................52
Figure 4-9 Alternative A-2: Distribution of CAS FTEs – Active Plants......................................53

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Figure 4-10 Alternative A-2: Distribution CAS FTEs-- Inactive Plants ......................................53
Figure 4-11 The AAP Cost Comparison (10-Year Investment and Operations in Millions).........54
Figure 4-12 AAP Cost Comparison (10-Year Investment and Operations).................................54
Figure 4-13 Rankings of Qualitative Factors..............................................................................55
Figure 4-14 The AAP Alternatives Qualitative Scores ...............................................................55
Figure 4-15 The AAP Alternatives Qualitative Rating................................................................55
Figure 5-1 DoD R&D Contract Obligations FY 95 – FY 98 (Q3) (In Millions)..........................59
Figure 5-2 Distribution of FY 1997 DoD Component R&D Contract Obligations with
Universities.........................................................................................................................59
Figure 5-3 U.S. Educational Institutions included in the Top 100 DoD Prime RDT&E Contracts
Awarded to US Educational Institutions and Non-Profits in FY 1998..................................60
Figure 5-4 Administration of DoD Contracts with MIT .............................................................61
Figure B-1 SUPSHIP San Diego Ship Repair Project Team Annual Workload Division Model....2
Figure B-2 Repair CAS Billets.....................................................................................................3
Figure B-3 Repair Non-CAS Billets.............................................................................................4
Figure B-4 Number of Required Billets Overall ...........................................................................4

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Executive Summary
This report presents the results of a study for the Office of the Deputy Under Secretary of
Defense (Acquisition Reform) concerning post-award contract administration in selected
components of the Department of Defense (DoD). In this study, the contract administration
services (CAS) performed by the Navy Supervisor of Shipbuilding (SUPSHIP), the Office of
Naval Research (ONR) and the Army Government Owned, Contractor Operated Ammunition
Plants (AAPs) were analyzed for possible consolidation to the Defense Contract Management
Command (DCMC).
This issue has been studied numerous times in the past, most recently by the DoD
Inspector General in January 1998. Prior studies have focused on whether or not the functions
could be transferred to DCMC. This study focuses on whether or not the functions should be
transferred based on cost and other considerations. This study is a Business Case Analysis, where
various alternative approaches, including the status quo, are compared to determine the best
business decision for the Department of Defense.
The analysis relied on extensive data gathering and site visits to representative offices for
all affected commands. Both initial "investment" costs and 10 years of operating and support costs
were calculated for the status quo as well as a number of alternative operating scenarios at each
organization. Importantly, qualitative factors such as impact on organizational mission, subject
matter expertise of assigned staff and timeliness of services were analyzed as well. The
recommendations for each organization are independent from the others and are based on the
combined results of our quantitative and qualitative analysis.
It is important to note that this decision has the largest impact at SUPSHIP, where the
number of affected personnel is significantly greater than the other two organizations. Figure ES-
1 provides a summary of the effort currently involved in post award CAS at the study
organizations.
Organization
Number of
CAS Work
Years
SUPSHIP
Repair Facilities 406.5
New Construction 402.9
Total 809.4
ONR 76
Army Ammunition Plants
Active 81.4
Inactive 4.9
Total 86.3
Figure ES-1 – Current CAS Effort
It is also important to note that unlike the organizations of the early 1990s, which were
consolidated into DCMC, the organizations we studied herein have been subjected to downsizing
over the last nine years and have achieved certain efficiencies already.

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A final related area of our study was to address the impacts of eliminating DFARS
242.203(a)(i)(B), which authorizes DoD components to retain contract administration functions
for research and development with universities.
Results
Figure ES-2 below provides a summary of our results for SUPSHIP. While numerous
operating scenarios were considered, only one alternative to the status quo was studied. The other
scenarios were determined to be infeasible in light of the shipbuilding environment.
STATUS Quo Alternative S-1A
SUPSHIP Current
Operations
Transition to DCMC (all
CAS personnel remain
on-site)
Cost (Discounted $M)
Investment Cost
10 Year O&S Cost
Total Cost (most likely)
Net qualitative Rating
$0.00
$446.3M
$446.3M
0.757
$5.3M
$543.7M
$549.1M
0.243
Figure ES-2 – SUPSHIP Results
Figure ES-3 below provides a summary of our results for ONR. The analyzed alternative
was the total transfer of all CAS from ONR to DCMC and physically consolidating personnel into
the DCMC Contract Administration Offices (CAOs).
STATUS Quo Alternative 0-1B
ONR Current
Operations
Transition to DCMC (all
CAS personnel move to
DCMC CAO)
Investment Cost
10 Year O&S Cost
$0.00
$43.0M
$43.0M
0.714
$ 1.2M
$42.5M
$43.7M
0.286
Figure ES-3 – ONR Results
Figure ES-4 below provides a summary of our results for Army Ammunition Plants. In
addition to the two operating scenarios associated with full transfer of CAS to DCMC, an
additional alternative, Alternative 2, was analyzed in which only the CAS functions not needing to
be performed on-site at the AAPs are transferred to DCMC. For this alternative, transferring
personnel are physically consolidated into the DCMC CAOs.

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STATUS Quo
A-SQ
Alternative A-1A Alternative A-1B Alternative A-2
AAP Current
Operations
Transition to
DCMC (all CAS
personnel remain
at AAP)
Transition to
DCMC (all CAS
personnel move
to DCMC CAO)
Partial
transition to
DCMC
(transferred
CAS personnel
move to DCMC
CAO)
Investment Cost
10 Year O&S Cost
$0.00
$54.3M
$54.3M
0.31
$1.2M
$60.2M
$61.4M
0.294
$1.2M
$55.3M
$56.5M
0.294
$1.2M
$50.6M
$51.7M
0.269
Figure ES-4 – Army Ammunition Plant Results
Regarding the issue of DFARS 242.203(a)(i)(B), study findings revealed that annually
approximately $1 billion is contractually awarded to universities for research and development.
The majority of these funds are awarded to ten universities, the Air Force and the Navy make the
majority of the awards, and the majority of these contracts are administered by ONR. Study
findings also revealed the following:
• The organizational affiliation of a contract administrator is of less importance than the
individual's understanding of the university environment, cost and business practices,
• The physical location of the contract administrator is generally not a critical factor
• A contract administrator who acts as a single point of contact for all of a university’s
contracts is preferable to multiple contract administrators
Recommendations
Organizational change brings with it risks and often times, unforeseen problems. As a
result, a change from the status quo needs to provide more than a marginal improvement in either
cost or quality of service. One key assumption of this study was that any change from the status
quo would need to be cost effective. While several of the above scenarios yield potential cost
savings; in no case are the savings anything greater than marginal. In fact, the projected cost
savings are within the range of expected cost-risk (as determined by risk analysis) in all cases.
Given such minimal potential cost savings, a tangible improvement in the quality of services
would need to be demonstrated to support a change from the status quo. However, the qualitative
results suggest the status quo to be most favorable in all cases. As a result, we recommend that
based on a Business Case Analysis, the status quo be maintained in all three organizations.
Key to making these types of business decisions is the quality of the data available for
analysis. In most of our data gathering efforts for this study, critical metrics and historical impacts
from past consolidations were not readily available. We recommend that, in the future, DoD

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should develop and define meaningful CAS performance metrics to be implemented in all DoD
components performing CAS. DCMC should take the lead among DoD CAS components by
consolidating critical CAS metrics and promulgating the metrics across the CAS community and
its customers. Meaningful metrics implemented across the DoD organizations would make
quantitative and qualitative measures of changes to the status quo more exact.
One of the reasons for consolidation is to allow better sharing of techniques, successes,
and "best practices" among professionals in a given community. While we recommend that a
formal consolidation not be undertaken in these cases, we do recommend that DCMC lead regular
DoD-wide sharing of approaches and success stories to continue to improve both the quality and
cost effectiveness of the post-award CAS function across the enterprise.
Pending the outcome of an ongoing Government effort to collect data on the current
assignments of CAS for university R&D contracts, it is recommended that DFARS 242.203
(a)(i)(B) be eliminated. A case-by-case determination of each of the major university-affiliated
laboratories should be considered prior to requiring delegation of post-award CAS functions and
determining the appropriate CAS component for each university. Additionally, a closer estimation
of the potential volume of work, which may be redirected to any CAS provider, should be known
to ensure that the recipient organization(s) is prepared for the additional volume of work.

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1 Introduction
This report presents the results of a study for the Office of the Deputy Under Secretary of
Defense (Acquisition Reform) (ODUSD (AR)) concerning post-award contract administration in
selected components of the Department of Defense (DoD). Specifically, the study addressed
whether to centralize post-award contract administration from selected DoD components to the
Defense Contract Management Command (DCMC), a major element of the Defense Logistics
Agency (DLA).
ODUSD (AR) retained Booz·Allen & Hamilton to conduct this study following a
competitive contract award on November 25, 1998. This effort is the latest of a series of studies
on this topic, most recent of which was conducted as an “evaluation” by the DoD Inspector
General (IG). That effort (see “Consolidation of DoD Contract Administration Services,” Report
No. 98-604, January 15, 1998) recommended that the Undersecretary of Defense for Acquisition
and Technology charter a joint executive level review of the cost effectiveness of consolidating
contract administration. However, many of the reviewers of the IG’s draft report did not accept
the rationale given for consolidation on a number of grounds, including lack of sufficient/specific
data to support that solution. As a result, an independent study was chartered. This report is the
result of that effort.
Section 1.1 below describes the specific focus and scope of the study, while Section 1.2
outlines pertinent background on DCMC. The rationale for conducting a Business Case Analysis
(BCA) and our methodology for doing so are presented in Sections 1.3 and 1.4 respectively. A
complete discussion of each of studied organizations and the results of the BCA is contained in
Sections 2 through 4. The final issue addressed in our study, regarding the retention of Defense
Federal Acquisition Regulation Supplement (DFARS 242.203(a)(i)(B) is discussed in Section 5.
1.1 Statement of the Problem
“Post-award” contract administration, or “contract administration services” (CAS) refers
to the functions performed by the Government after the award of a contract. The most prominent
functions are carried out in such activities as:
• Processing payments
• Executing contract modifications
• Exercising quality control
• Monitoring schedule performance
In fact, the full list of CAS functions contained in the Federal Acquisition Regulation
(FAR) suggests many more activities. The CAS Functions contained in the FAR and DFARS are
provided in Appendix A.
CAS functions are exercised by the administrative contracting officer (ACO) and his/her
representatives. The functions of the procuring contracting officer (PCO) are not within the scope
of this study.
The study focused exclusively on shifts of CAS responsibilities in four settings, three of
them defined by organization, the fourth by the use of research and development contracts with
universities:

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• Transfer of administration responsibility from the Naval Sea Systems Command
(NAVSEA) Navy Supervisor of Shipbuilding, Conversion and Repair (SUPSHIP) to
DCMC
• Transfer of administration of grants and contracts with universities from the Office of
Naval Research (ONR) to DCMC
• Transfer of contract administration responsibility from the Government-Owned,
Contractor Operated (GOCO) Army ammunition plants to DCMC.
• Elimination of the DFARS provision 242.203(a)(i)(B) that authorizes components to
retain contract administration functions for research and development with
universities.
If made, these changes would eliminate most of the CAS responsibilities still outside the
scope of DCMC operations, with a few notable exceptions, such as the US Army Corps of
Engineers and the Naval Facilities Engineering Command.
The IG assessment cited above hinged most of its conclusions on assertions of greater
efficiency of CAS when exercised in a consolidated manner. The consolidation alternative, as
described by the IG report, achieves greater economies of scale in labor. However, no quantitative
data were provided in the report to make that case or to support any other conclusion. A major
intent of the present study is to provide some quantitative foundation for making conclusions
about consolidation efficiency and other issues.
The IG report also referred to several qualitative issues, such as the added professionalism
of CAS personnel that, the report asserted, could be achieved in a consolidated arrangement
compared to the current decentralized mode in the organizations under study. The present study
also addresses such qualitative factors and uses data and information from the affected
organizations to reach conclusions.
Such qualitative issues heighten the focus on effectiveness versus efficiency issues.
Effectiveness of CAS can be viewed, for example, in terms of the success of the overall process.
In the SUPSHIP arena, for example, effective CAS contributes to the acquisition process
delivering ships on time, according to specification, and with no undue contractor claims exposure
to the Government. Effectiveness was not given extensive treatment in the IG report. The study
team believes that the benefits of CAS effectiveness could easily dwarf the benefits of being more
efficient in CAS, but recognizes the challenge of developing data to prove that case.
Section 1.4 of this report presents detail on the methodology used, including the criteria
for evaluating the organizational alternatives.
1.2 Background and History of the CAS Consolidation Issue
Opportunities to improve CAS via consolidation have been asserted and studied for more
than 20 years. In 1979, the Office of Dr. William Perry, then the Director of Defense Research
and Engineering, undertook such a study that looked at the potential for consolidating the CAS
for large platforms and weapons systems acquisitions in the Defense Contract Administration
Service. The primary impetus was that the military services were not executing CAS well for each
other, and that it needed to be moved to a “neutral corner” in a purple organization to be done
most effectively.

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In the ensuing 20 years, other studies have been performed, and consolidation has
occurred in most large-scale cases. In the 1990s, besides the DoD IG study cited above, three
other studies addressed the DoD components that are the focus of the current effort. However,
none of these studies employed extensive analysis of cost data. These studies are summarized in
the Figure 1-1 below.
STUDY DATES OBJECTIVE RESULTS
Army Ammunition
Plants (AAP)
1990 Determine exclusion of
AAPs from consolidation
with DCMC
The AAP CAS transfer would neither
enhance readiness nor affect cost avoidance
Supervisor of
Shipbuilding
(SUPSHIP)
1990 Determine exclusion of
SUPSHIP from consolidation
with DCMC
The DEPSECDEF deferred decision based
on:
1) Fifty percent or more of SUPSHIP
functions were outside the mission of
DCMC
2) Non-CAS functions were not readily
severable from the SUPSHIP non-CAS
functions
3) Transfer of SUPSHIP CAS to DCMC
would probably increase staffing due to
Navy's need to maintain an on-site
presence
SUPSHIP 1993 Streamline Contract
Management
The Under Secretary of Defense (Acquisition
and Technology) recommended Navy
retention of SUPSHIP CAS functions.
Figure 1-1 Previous DoD Studies
CAS consolidation, if effected for the organizations under study, would naturally take
place in DCMC. DCMC was chartered in the Defense Management Review Decision (DMRD)
916 in 1989 and stood up the following year. The new organization was intended to both save
money and increase CAS effectiveness by:
• Consolidating, streamlining, and achieving economies of scale
• Implementing uniform CAS policies and procedures and acting consistently by
presenting a single face to industry
• Increasing the quality and professionalism of CAS personnel
• Reducing direct and overhead costs of CAS labor
• Preserving, for regulatory purposes, the division between ACO and PCO
responsibilities
DCMC provides CAS to customers throughout DoD. For the current fiscal year, a
projected 368,000 prime contracts will be administered, down about 20 percent since the start of
the decade. Current contracts managed have an estimated obligation value of about $800 billion.
Like other components in the Department, DCMC has implemented significant
restructuring, including changing the organizational structure and downsizing. Today, DCMC has
just under 13,000 authorized positions/Full Time Equivalents (FTEs) and is on a trajectory to
shed still more positions. Notably, the Command management attributes part of its ability to
reduce staff and increase productivity to the increasing use of “risk management” in deploying
CAS labor. Risk management approaches apply increasingly less labor to CAS workload based on

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statistical sampling techniques, demonstrated satisfactory performance of suppliers, and
information management support.
DCMC's mission is to provide customer focused contract management services --
throughout the acquisition life cycle. To accomplish its mission, DCMC performs a variety of
functions, including:
• Providing contract management for diverse product lines among DoD services
• Performing price/cost analysis, overhead and contractor system reviews, financial
services, property and plant clearance, transportation and packaging, and termination
settlements
• Providing quality assurance by verifying contractor processes;
• Providing program and technical support by analyzing cost, schedule and technical
performance of contractor programs and systems
DCMC's Contract Administration Offices (CAOs), located throughout the United States
and the world, provide the following categories or types of post-contract award services to
contracting officers and program managers:
• Provide support to fact-finding and negotiations
• Conduct safety and environmental assurance
• Conduct evaluations of contractor processes and controls
• Conduct evaluations of contractor corrective actions
• Provide control of property (such as facilities and Government furnished materials)
• Conduct independent evaluation of contractor progress to include progress payment
evaluations
A complete list of CAS functions is provided as Appendix A.
DCMC's CAOs manage contracts within a geographic area and within contractors' plants.
This management includes daily, on-site surveillance of contractor systems and program-specific
concerns that cannot be viewed or monitored by offsite agencies, including access to and
participation in internal contractor meetings. The CAO organization allows DCMC personnel to
reside close to or in contractors' facilities and to tailor services to customers' unique requirements
and associated risks.
Through the use of such modern techniques, DCMC is continuing the evolution begun
nearly a decade ago to standardize and economize CAS processes. The consideration of
transferring to DCMC some of the few remaining CAS operations not under its control is
therefore readily understandable. In order to provide definitive recommendations about potential
consolidations, the present study takes a business case approach, including a quantitative basis not
previously undertaken.
1.3 Rationale for Conducting a Business Case
As discussed above, the issue of whether or not to centralize the post-award contract
administration function has been studied numerous times. Based on previous studies as well as
recent interviews with DCMC, DCMC is capable of accepting this function. Using this
assumption, we focused on answering the question - "Is it a good business decision to change
where the function is being performed today?"

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When organizations need to make a complex business decision that includes multiple
alternatives and numerous decision factors, a proven tool to support decision making is Business
Case Analysis. Business Case Analysis is an extended form of Cost Benefit Analysis in which the
alternatives’ total costs for satisfying a business need are weighed against the alternatives’ total
benefits to determine the optimum solution. Business Case Analysis goes one step further than the
Cost Benefit Analysis and links each alternative to mission performance and identifies which
alternative will allow an organization to optimize mission performance given cost and other
constraints. While dollar valued costs and benefits are important in the decision criteria,
qualitative factors such as quality and timeliness are also directly included in decision making. The
output of a Business Case is an analysis of all viable alternative business strategies along with
recommendations for proceeding with the superior alternative.
1.4 Methodology
Our approach to a Business Case employs four major steps. After assessing the
environment and collecting the data, alternatives are identified and analyzed. One alternative is
then selected as the “preferred alternative” for resolving the problem. Figure 1-2 illustrates this
methodology.
Environmenta
l Assessmen
t
Environmental
Assessment
Alternativ
e 1
Alternative
1
Preferred
Alternative&
Recommendation
Preferred Alternative
& Recommendation
Alternativ
e 2
Alternative
2
Alternativ
e 3
Alternative
3
Data
Collection
Data
Collection
Quantitative and
Qualitative
Alternatives Analysis
Figure 1-2 Business Case Methodology Model
1.4.1 Environmental Assessment
Development of this Business Case began with an Environmental Assessment. During this
assessment we reviewed background documentation and interviewed key stakeholders as well as
authors of the January 1998 DoD IG study. This helped us gain an understanding of the relevant
issues, identify key mission performance factors (as well as how this function affects them), and

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perform a limited performance gap analysis. The gap analysis identified any areas where the
current organizational approach could be limiting the organization from meeting its mission. As
part of the environmental assessment, we also developed a Cost Element Structure, a type of
classification methodology. This structure is used later for collecting and/or estimating all costs.
Lastly, we defined the factors used for comparing the alternatives qualitatively.
1.4.2 Data Collection
After we assessed the environment, we moved into the Data Collection stage. During this
portion of the study, we reviewed in detail documentation from previous studies; collected data
on staff (numbers, grades, and classifications) performing CAS functions throughout the target
organizations; collected cost and budget data from the affected organizations to begin populating
the cost model; and conducted numerous interviews with customers, performers and staff of the
studied organizations. Additionally, we made site visits to selected SUPSHIP, ONR, and AAP
locations to observe the operations and validate to the extent possible the hard copy data
provided. A significant portion of this step was directed at defining and quantifying operations
today, which represents our "status quo" alternative. This was a key step as all alternatives used
the status quo as a baseline. We also met numerous times with DCMC to begin formulating
transition requirements and alternative consolidation scenarios. A complete list of the sites visited,
interviews and meetings conducted, and data collected is provided in Appendix B.
By explicit direction this study employed "currently available contract administration cost
data associated with labor, other direct costs and overhead." We did not audit any of the cost or
budget figures provided.
1.4.3 Alternatives Analysis
During the Alternatives Analysis stage, we developed cost estimates and performed a
rigorous qualitative analysis for each alternative. The following sections describe the alternatives
that we identified, as well as our approach to the quantitative and qualitative analyses.
1.4.3.1 Alternatives Definition
For each organization we defined the status quo as today's operations projected forward
for ten years. Under the status quo, workload and staffing remains constant throughout the
period. One alternative to the status quo is to transfer the entire function to DCMC. Within this
alternative, there are two operational scenarios. In one, personnel remain in place at their current
location. (We titled this alternative 1A.) In the other scenario, personnel are transferred to the
nearest DCMC Contract Administration Office (CAO). (We titled this alternative 1B.) A second
alternative considered represents the transfer of some portion of the current function to DCMC.
(We titled this alternative 2.) As we evaluated current operations and missions at each
organization, we found that not all of the potential alternatives were feasible. The following table
provides a list of the alternatives we fully evaluated from both a quantitative and a qualitative
perspective.

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Organization Alternative Description
SUPSHIP Status Quo (S-SQ) Today's operations
S-1A Transfer CAS to DCMC, personnel stay in place
S-1B Not evaluated 1
S-2 Not evaluated1
ONR Status Quo (O-SQ) Today's operations
O-1A Not evaluated2
O-1B Transfer CAS to DCMC, personnel move to CAO
O-2 Not evaluated2
Army Status Quo (A-SQ) Today's operations
Ammunition A-1A Transfer CAS to DCMC, personnel stay in place
Plants A-1B Transfer CAS to DCMC, personnel move to CAO
A-2 Partial transfer of CAS to DCMC, leave some
CAS at AAP
Figure 1-3 Names of Alternatives and Definitions
1.4.3.2 Cost Element Structure
After we identified the alternatives, we developed a cost element structure. Consistent
with DoD standard cost estimating practices, we separated costs into two categories, investment
costs and operations and support (O&S) costs. Investment costs in a business case analysis
address the up-front costs required to support any change from the status quo. Within investment
costs, we identified two relevant cost elements; investment training and system interface
development. Within O&S, we identified two relevant cost elements; recurring training and
personnel. The majority of the costs fell into the personnel category, so this category was further
segregated depending on the alternative.
1
Due to the nature of the work and its impact on overall mission, we determined that the CAS function could not be moved off-
site for SUPSHIP (alternative S-1B). As the analysis will reveal, there are no “pure” CAS functions at SUPSHIP. To determine
exactly what functions and the number of people involved in a partial CAS transfer would require a site by site analysis and
more data than was available. Also, separating the CAS function across two organizations was determined to not be a good
business approach. Therefore, alternative S-2 was not evaluated.
2
Due to the close proximity of DCMC offices and ONR regional offices, we determined that it would be impractical to transfer
CAS functions to DCMC without physically moving people to the DCMC spaces (Alternative O-1A). Additionally, because of
the overall small number of personnel performing the CAS functions for ONR and due to the relative uniformity of their grant
administration functions, there was no logical scenario for transferring only a part of the function (Alternative O-2).

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Investment Costs
1.1 Training Up-front training costs to ensure that personnel are cognizant of
DCMC's standard CAS operating policies and procedures.
1.2 System Interface
Development
Computer integration costs for ensuring that any existing CAS
information systems communicate properly with DCMC's
automated CAS system, Mechanization of Contract Administration
Services (MOCAS).
Operations and Support Costs
2.1 Recurring Training Annual training costs incurred by CAS personnel.
2.2 Personnel Costs associated with employing personnel. We divided this
element into different categories for AAP, SUPSHIP, ONR and
DCMC to capture the different burden rates of the respective
organizations.3
Figure 1-4 Cost Element Structure and Definitions
1.4.3.3 Quantitative Estimate Development Methodology
After we developed a tailored cost element structure, we reviewed documentation,
interviewed stakeholders, and utilized professional judgment to populate our model. Our first task
was to identify costs associated with the status quo alternatives, thus capturing the baseline. After
we identified the status quo costs, we assigned costs to the alternatives that we identified. We
used a “bottoms up” approach for assigning costs to the alternatives so each estimate is a function
of many inputs. Our task statement explicitly directed the use of "currently available" data. Where
data was not available or precise, our direction was to "use estimates and caveat" our results. We
recognized that many of the inputs were inexact. Therefore, in keeping with standard cost
estimating practices, we assigned low and high ranges to some of these more esoteric cost
estimates. Thus, our results are presented as ranges comprised of low, most likely, and high cost
estimates. The basis of estimate for these alternatives is discussed at length in the respective
appendices.
We also present our alternatives in three types of dollars: constant, inflated, and
discounted. Constant dollars are used as a starting point, not incorporating inflation or the time
value of money. For budgetary purposes, we provided inflated costs to determine how much
money to set-aside for the alternative in question. For comparative purposes, we also provided
discounted costs that incorporate the time value of money.
3
Personnel costs include the direct and indirect costs of employing staff, i.e., salaries, benefits, facilities, supplies, Information
Technology, training, etc. The indirect costs for each organization were calculated and applied as a “burdened factor” to that
respective organization's average CAS salary. For example, if a GS 15 is compensated at $90K per year, their actual cost to the
Government is greater than that, perhaps as much as 1.8 times $90K, per year or $162K. The overhead calculations addressed
in this study are provided in Appendix C.

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1.4.3.4 Quantitative Estimate Assumptions
• While costs will continue indefinitely, changes in workload and other environmental
factors are likely at some point in the future. For ease of comparison, we chose a 10
year “steady state” period for quantifying each of the alternatives.
• We compared total costs to DoD associated with performing the CAS function only.
Non-CAS costs were included only if there was an additional cost that needed to be
incurred to make a specific alternative feasible.
• Only “incremental” DCMC costs associated with CAS functions at the candidate
organizations are captured. In other words, the total cost of DCMC is not included.
• We utilized OMB A-94 inflation factors (2.3% for budgetary purposes) and discount
rate (3.6% for comparative purposes on a 10-year project).
• Sunk or prior year costs are not included.
1.4.3.5 Qualitative Comparison Methodology
To assist in capturing the value of the qualitative factors in relation to the performance of
CAS in the various alternatives, the software tool "Expert Choice®" was utilized. Expert
Choice® is a multi-criteria decision support tool based on the Analytical Hierarchy Process
(AHP). The AHP is a powerful and comprehensive methodology for making decisions using both
measured data and judgments from the decision maker(s). The AHP assists with the decision
making process by allowing decision makers to organize and determine the significance of the
evaluation criteria and then subsequently apply the criteria to the alternative solutions. Through
the process of structuring a decision into a hierarchical model and then pairwise comparing
objectives and alternatives, decision makers can determine the best overall course of action to
take.
To apply AHP, criteria for decision making are established and pairwise comparisons of
the criteria are performed to determine relative weights of the criteria in relation to each other
(reflecting importance of factors in decision making). Once the relative weights are established,
alternatives are evaluated against their ability to satisfy or achieve those criteria. These evaluations
when combined with the weights yield a relative qualitative value for each alternative.
1.4.3.5.1 Criteria
The qualitative factors used to assess the effectiveness with which CAS is provided are
identified and defined in the following table. The factors have been generated from a generic
perspective for performing CAS, and are non-specific to any of the three entities being studied.
The list of criteria was developed from factors addressed in previous studies combined with
factors determined by the study team to be important in the Government contracting process in
determining the level of performance of CAS.

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Qualitative Factors
One Face to Industry (Performer) - This factor measures the benefit, if any, for a supplier to deal
with just one Federal Government interface (i.e. agency), rather than multiple faces, in the
administration of its Government contracts. This factor purports that there would be consistency of
policy, regulations, interpretations, approaches, responses, processes, etc., if there were only one party
with which to deal. Additionally, with a single agency representing the Government, the contractor
arguably will not have the opportunity to play one Government agency/entity against another, e.g. in
hopes of leveraging his preferred solution.
One Face to the Customer - This factor measures the benefit, if any, for a customer (i.e., the requiring
office that puts up the money for the contractor’s product/service) to deal with just one interface rather
than multiple faces, in the administration of its contracts. This factor purports that there would be
consistency of policy, regulations, interpretation, approaches, responses, processes, etc, if there were
only one party with which to deal.
Timeliness - This factor measures the time it takes to provide CAS to customers and performers. The
focus is on how quickly decisions are made, direction is given, modifications are
negotiated/completed, certifications/approvals are given, payments are approved, etc.
Subject Matter Expertise of CAS Staff – This factor measures the ability of the ACO, or other
Government personnel performing CAS functions, to make independent judgments, certifications,
decisions and conduct negotiations independently based on personal knowledge/experience with the
subject matter.
Synergy with the Non-CAS functions – This factor measures how the performance of the CAS
functions supports the entire “production” process; i.e. CAS is not a function that is tacked on at the
end, or is just trying to keep up, but actually supports/bolsters contract performance.
Independence of CAS functions - This factor measures the importance of having the party
performing CAS to be a separate organizational entity from the party that is the buyer and the
customer, i.e. a separation of CAS and program office functions to ensure arms length objective
transactions.
Achievement of mission objectives/impact on military readiness – This factor measures the
importance of the contract administration functions in supporting the performing organization's
achievement of their overall mission.
Ability to recruit, assign, develop & retain CAS staff – This factor measures how effectively the
organization performing the CAS functions will be able to staff (recruit and retain) the CAS billets
with personnel knowledgeable in the subject area (shipbuilding, ammunition production, basic
research) as well as in the performance of CAS functions (safety, quality, pricing, transportation,
negotiation, etc.).
Expedience of adopting/implementing acquisition/CAS reforms – This factor measures whether a
consolidated approach to performing CAS (i.e. one single organization) lends itself to faster
adoption/implementation of acquisition reforms throughout the CAS staff.
1.4.3.5.2 Qualitative Evaluation
Expert Choice® utilizes the process of pairwise comparisons, which allows the evaluator,
or decision maker, to look at the elements of a problem in isolation: one element compared to
each of the other elements, two at a time. The software tool prompts for the judgments, and then
synthesizes all judgments into a unified whole in which the criteria are clearly prioritized from
most important to least important. Judgments are made about pairs of elements relative to a
criterion or property that they have in common. It is from a multiplicity of these pairwise
comparisons across all the elements being compared that we build the information that leads to
the priorities.

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Members of the Booz⋅Allen study team performed independent pairwise comparisons, the
results of which were entered into Expert Choice®. These inputs became the Booz⋅Allen team
weighted criteria. Inputs from each of the studied organizations were solicited as well. A total of
eleven sets of inputs were received from ONR, Army Industrial Operations Command (IOC), and
SUPSHIP/NAVSEA. The Government inputs were entered into Expert Choice® to become the
Government team weighted criteria. The Government’s weighted criteria were then combined
with the Booz⋅Allen study team weighted criteria to develop the composite set of weighted
criteria applied in the study. When the two sets of weighted criteria were combined, the individual
criteria weights changed slightly, but their rank order of importance did not.
1.4.3.5.3 Weighted Values of Evaluation Factors
The results of the pairwise comparisons are shown in Figures 1-5 and 1-6, which depicts
the relative importance of each the criterion in relation to the other criteria that have been selected
to evaluate CAS. The results of the criteria weightings are not specific to SUPSHIP, ONR,
DCMC or the AAPs but represent a broad DoD perspective of the relative importance of various
factors for evaluating CAS performance.
22%
18%
16%
12%
10%
9%
5%
4% 4%
0%
5%
10%
15%
20%
25% Achievement
SME Personnel
Timeliness
Staff
Synergy
Industry
Independence
1 Customer
Acquisition Reform
Figure 1-5 Weighted Criteria Used for Qualitative Analysis
Achievement of Mission Objectives/Impact on Military Readiness was determined to be
the most important criteria against which the alternative scenarios for performing CAS should be
assessed. This criteria's assigned weight of 22% of the total qualitative evaluation criteria indicates
that its achievement is crucial in selecting the appropriate scenario for performance of CAS. The
top three weighted evaluation criteria (Achievement, Subject Matter Expertise, and Timeliness)
make up 56% of the decision criteria in determining how CAS functions can best be provided.
The remaining six criteria combine for less than half of the study's relative importance of the
qualitative factors in the selection of the optimum scenario for performance of CAS.

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Rank Criteria Weight
1 Achievement of mission objectives / impact on military readiness 22%
2 Subject Matter Expertise of CAS Staff 18%
3 Timeliness 16%
4 Ability to recruit, assign, develop and retain CAS staff 12%
5 Synergy with the Non-CAS functions 10%
6 One Face to industry (Performer) 9%
7 Independence of the CAS function 5%
8 One face to the customer 4%
9 Expedience of adopting/implementing acquisition/CAS reforms 4%
Figure 1-6 Rankings of Evaluation Criteria
1.4.3.5.4 Alternatives Scoring
Following the weighting process, the evaluators determined as between two alternative
scenarios, which scenario best achieved or satisfied a given criteria. For example, in the case of
ONR, the nine criteria were evaluated between the Status Quo and the Total Delegation of CAS
to DCMC alternative, to determine which scenario best satisfied each criteria. These evaluations
were based on data received during our interviews with the staff and customers that do have, or
have had, some involvement with DCMC. Their responses include their own comparisons of the
services received as well as an extrapolation from their current experiences to the envisioned
alternative scenario. The results of this evaluation were combined with the weights for each
criteria to yield a total qualitative value for each scenario. The results of the qualitative
comparisons are presented in the discussions of each organization in the subsequent sections of
this report.
1.4.4 Preferred Alternative & Recommendation
After we developed the cost estimates and qualitatively compared the alternatives, we
were able to make a recommendation about which alternative provided the optimum mix of
minimizing costs and maximizing performance. This alternative is called the preferred alternative.
The results of this step are presented in each of the following three sections of this report.

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2 Supervisor of Shipbuilding
2.1 Mission and Background
There are nine Supervisor of Shipbuilding, Conversion and Repair (SUPSHIP) offices,
each a field activity of the Naval Sea Systems Command (NAVSEA). The major SUPSHIP
mission functions, as defined in the SUPSHIP Operations Manual (SOM), June 1994, are:
• The management of DoD shipbuilding, design, conversion, and facility contracts
• The procurement and management of overhaul and repair contracts
In performance of these roles, SUPSHIPs perform ship maintenance planning, project
management, procurement, engineering, technical and contract administration functions.
SUPSHIP is the on-site representative of NAVSEA and the program manager, managing and
coordinating activities involving the ship owner/operator (i.e., the Fleet Type Commander in the
case of ship repair, and the Program Executive Officer under the ASN (RD&A) for new
construction), the shipyard, and the ship’s crew.
It is the SUPSHIP activities associated with their contract management functions that are
the focus of this study. These specific functions include the contract administration services
(CAS) for contracts involving Naval ship construction, conversion, and repair. SUPSHIPs are
designated to perform the contract administration functions listed in FAR Parts 42.2 and 42.3,
DFARS 242.302, Navy Acquisition Procedures Supplement, (NAPS) 52.42 and the NAVSEA
Contracting Handbook, (NCH) 42.2.
2.1.1 CAS Operations
Various procurement regulations and directives define the SUPSHIP performance of
contract award and field contract administration functions. SUPSHIP operating procedures are
defined in the SUPSHIP Operations Manual (SOM), June 1994. This manual merged the
information previously contained in the Ship Acquisition Contract Administration Manual
(SACAM) and the Ship Repair Contracting Manual (SRCM). The SOM was developed as an
extensive revision of outdated information, and contains current language of the FAR, DFARS,
NAPS and NCH. The SOM provides SUPSHIP personnel with a generalized understanding of
principles of procurement, administration, and performance of new construction contracts, as well
as repair and overhaul contracts. The SOM describes the involvement of SUPSHIP in the
processing, approving and controlling of changes, deviations and waivers, and the performance of
other contract administration and management requirements.
The SOM describes a particular style of contract administration “involvement” defined by
NAVSEA as aggressive contract administration based on an in-depth knowledge of the
contractor’s operations, especially any weaknesses in areas involving policy, procedure, and
performance. In general, involvement includes the monitoring of cost, delivery, completion, and
quality, and an understanding of their interrelationships. The SOM specifically states that
involvement is not intended to lead to the management of a contractor’s operations, but is
intended to provide an aggressive approach that encompasses all aspects of contract
administration. This aggressive or “involved” approach to contract administration is key to the
success of the SUPSHIP operation. That is, it supports the pace with which work and contract
modifications must be accomplished, and facilitates the coordination of the contractor’s efforts

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with those of the ship’s crew and other Navy installation teams. It is feared that a more hands-off
approach would slow the process.
Unscheduled and unplanned changes that deviate from the specific tasks of a repair
contract are an everyday occurrence at SUPSHIP. Requests for Contract Changes (RCCs) or
Modification Requests (MRs) are routinely generated to respond to repair requirements that only
become apparent after contract award, when the ship’s equipment has been “opened and
inspected” for identification of specific repairs. For example, the U.S.S. Bunker Hill was
scheduled for $15 million worth of repairs during a scheduled availability. It is estimated that at
the end of its nine-month availability the total cost to make the ship “mission ready” will be $18
million. The $3 million of additional work was largely the result of additional repairs that could
not have been detected until the ship was in the shipyard. This additional work had to be detected,
defined, prioritized, priced, scheduled, and negotiated in real time to allow the contractor to begin
work immediately. On the U.S.S. Nimitz, it was estimated that over 2,500 RCCs were generated
in a nine-month period.
Conclusions made by previous studies of SUPSHIP CAS performance were observed during
this study. These conclusions include:
• Timeliness of providing technical and contractual direction to the contractor is critical
• Project Team staff perform both CAS and non-CAS functions
• CAS staff have trade level/journeyman knowledge
• Project Team staff are able to prioritize work to be performed, resolve technical
issues, and understand the contractual implications of both
2.1.2 Organization and Responsibilities
The basic SUPSHIP functional organizational unit, which executes the SUPSHIP mission,
is the Project Team. This team structure has evolved over time and is designed to optimally
manage the contractual, business, and technical oversight; the multiple relationships; and the
technical requirements unique to the SUPSHIP environment. The Project Team structure includes
marine surveyors with trade specialties such as hull, machinery, electrical, weapons and combat
systems, as well as quality assurance representatives, program management personnel, and others.
Each team composition will differ depending on the size and complexity of the specific project,
i.e., new construction, major conversion, nine-week repair availability, etc. A typical repair project
team will consist of approximately 13 staff representing the following roles and functions:
• Ship Superintendent
• Administrative Contract Officer
• Program Manager
• Ship Surveyor (Trade Specific)
• Quality Assurance
• Material Management
• Finance
• Safety/Environment
• Barge Representative
• Design

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As members of this Project Team, SUPSHIP personnel perform a wide range of functions.
In addition to their delegated CAS functions, their role is to provide on-site field technical and
engineering expertise as an essential part of the extension of NAVSEA’s and/or the program
manager’s technical, contractual and programmatic authority and responsibility. Many SUPSHIP
personnel do not distinguish, or know the difference, between the CAS and non-CAS functions
they perform. The Project Team typically sequences and integrates the work of the ship’s crew
and other Navy repair activities with the shipyard’s work. The Team also assists the ship’s crew in
overseeing contractor work.
As the Navy's single point of contact for resolution of technical and contractual problems,
SUPSHIPs perform a range of functions, which include
• Participating in test and operation of naval ship propulsion plants
• Serving as Procuring Contract Officer (PCO) with the authority to issue orders under
Master Ship Repair Agreements / Agreements for Boat Repair
• Negotiating with the Fleet on customer issues of scope and schedule
• Performing planning yard engineering and design services for assigned ship classes
• Ensuring the safety and welfare of the ship, its systems (including fuel and
ammunition), and its embarked crew while at the contractor's plant.
2.1.3 Recent Changes
SUPSHIP has reorganized, realigned and incorporated process improvements that have
caused them to operate more efficient and intelligently. SUPSHIP offices are sharing their
resources and intellectual capital, standardizing approaches and specification language, and
allocating their workload more equitably across the workforce.
2.1.3.1 Recent Downsizing and Realignment
There are currently nine SUPSHIP offices, each reporting as a separate field activity
command to NAVSEA. Since the joint OSD/DLA/Navy review of SUPSHIP CAS functions was
conducted in 1992, the Navy has restructured and reduced SUPSHIP staffing to take advantage
of management efficiencies. For example, the following six SUPSHIP offices have been closed:
• SUPSHIP Boston, MA
• SUPSHIP Brooklyn, NY
• SUPSHIP San Francisco, CA
• SUPSHIP Long Beach, CA
• SUPSHIP Sturgeon Bay, WI
• SUPSHIP Charleston, SC
SUPSHIP has consolidated operations with the establishment of Business Operating
Centers at Portsmouth (for the East Coast), Jacksonville (for the Southeast and Gulf Coast areas)
and San Diego (for the West Coast).
2.1.3.2 Process Improvements
In addition to organizational restructuring and regionalization, SUPSHIP has made
process improvements aimed at gaining efficiencies in planning (contract specification
development), contracting (PCO as well as ACO functions), technical documentation storage and

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management, and the employment of automation to accommodate the movement of work instead
of the movement of workers. For example, SUPSHIP has:
• Enhanced the contract methodology from using mostly firm fixed price contracts based
on lowest bid, to the utilization of "best value" analysis and alternate forms of
contracting to provide the responsiveness necessary to meet the fleet needs
• Developed the Indefinite Delivery Time Contract for specific type work functions,
such as steam system repair
• Developed standardized contract specification language for nationwide use
• Adapted quality assurance as a result of ISO-9000 standard implementation, reducing
the number of Government checks and process validations
• Established the formal Lessons Learned program integrated into the automated field
office software, to capture and use the information to improve the process
• Standardized automated information systems to facilitate electronic interchange of
information among SUPSHIPs as well as between SUPSHIP and the contractor
2.2 Definition of the SUPSHIP Status Quo
The Navy is currently operating their nine SUPSHIP offices with a total of 2665 staff, as
shown in the Figure 2-1 table below. These 2,665 staff are assigned to the SUPSHIP Project
Teams and regularly perform project management and planning, procurement, engineering,
technical support and contract administration functions.
SUPSHIP Location
Current Staffing
(CAS and non-CAS)
Bath
Groton
Jacksonville
New Orleans
Newport News
Pascagoula
Portsmouth
Seattle
San Diego
Total
218
210
180
290
386
332
417
102
530
2,665
Figure 2-1 SUPSHIP Staffing
All SUPSHIP billets are structured to be multi-functional. Assigned personnel perform
CAS, delegated CAS and non-CAS functions interchangeably throughout the course of a normal
workday. Previous NAVSEA and SUPSHIP studies have determined that about 27% of ship
repair workload is associated with executing CAS functions. For new construction, studies have
estimated that about 35% of the workload is attributed to the performance of CAS. Similar

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estimates were provided during the Booz⋅Allen study. Figure 2-2 shows the 1997 overall
SUPSHIP workload estimated for each functional area.
New Construction Repair
CAS Non-CAS TOTAL CAS Non-CAS TOTAL Grand
Total
Work Years 406.5 752.8 1159.3 402.9 1102.6 1505.5 2,665*
Percent 35% 65% 27% 73%
Figure 2-2 SUPSHIP Fiscal Year 1997 Workload
The estimated cost of performing the CAS functions in the current SUPSHIP Status Quo
is as follows:
New
Construction Repair Total
$ Million 27.1 26.8 53.9
Figure 2-3 SUPSHIP Fiscal Year 1997 Total CAS Cost
The main element of these costs is the cost of the civilian and military personnel. These
estimates were calculated by multiplying the work years associated with CAS times the average
SUPSHIP salary. Detailed cost date is presented in Appendix E.
2.3 Definition of the Alternative CAS Scenario
2.3.1 Background
For this study, we visited three SUPSHIP offices and the shipyards over which they have
plant cognizance, including both new construction and repair. The objective of these visits was to
become more familiar with office operations and to experience the environment in which
SUPSHIP personnel perform their daily tasks. We met with DCMC Customer Service
Representatives at DCMC Headquarters to discuss the possible scenarios which would result
from the transfer of CAS functions, to obtain an understanding of the manner in which the transfer
would be accomplished and to assess any related operational and resource implications.
The alternative scenario evaluated in this study is the transfer of all SUPSHIP CAS
responsibilities, as reflected in FAR 42.302(a), to DCMC. If these CAS functions were delegated
to DCMC, NAVSEA/SUPSHIP determined that SUPSHIP would retain the CAS functions
reflected in FAR 42.302(b), as well as all of the non-CAS SUPSHIP functions. For ease of
reference, we have referred to all functions retained by SUPSHIP as “non-CAS.”
2.3.2 Assumptions
As confirmed by DCMC and Navy SUPSHIP management, the transfer of CAS functions
would be accomplished on an "as-is, where-is" basis with the transfer of billets and the
reassignment of personnel from the Navy’s SUPSHIP offices to DCMC.
*
indicates number has been rounded

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Currently, DCMC’s only involvement in the contract administration of ships is a small
team supporting the Military Sealift Command (MSC) through a Memorandum of Agreement
established in 1995. DCMC is not involved with administration of the construction, conversion or
scheduled maintenance of these ships, and has no experience in administration of Navy ships other
than limited experience with small boats and craft. According to DCMC headquarters
representatives, 12 personnel perform the CAS functions for MSC today. The MSC contract
includes oversight of minimal maintenance on the forward-deployed Maritime Prepositioning
Ships (MPS), but does not include oversight of the periodic long-term overhauls scheduled every
three years. The contractor ship repair work associated with this oversight is not the same as that
which is overseen by SUPSHIP.
Consequently, the unique requirements associated with Navy ship repair and new
construction CAS functions, along with the magnitude of workload transferred, suggest that an
in-place transfer would be most practical. In addition, the need for close and continuous daily
communications between the Government on-site team, the contractor, and the ship’s crew
requires that the newly transferred DCMC personnel remain on the waterfront in the shipyard
environment.
As described earlier, the estimated ratio of level of effort of non-CAS to CAS functions is
about 70/30. At each integrated SUPSHIP operation, the same personnel currently perform CAS
and non-CAS functions. Separation of these functions would require a detailed site-by-site, billet
by billet, resource and workload assessment to determine the CAS/non-CAS responsibilities. This
analysis would be required to determine how the CAS and non-CAS functions would be split
among the specific billets and how personnel would be assigned. Absent this detail, our alternative
scenario analysis depended on generalizations, extrapolations and analogies across SUPSHIP
operations.
2.3.3 Functional Organization and Relationships
For purposes of this study, the Navy, using the Project Team structure as the basis,
analyzed the impact of the CAS function transfer to the performance of SUPSHIP’s non-CAS
functions. Separate analyses were conducted for ship repair and for new construction operations.
These analyses, which are explained in Appendix D, SUPSHIP Workload Analysis, determine the
combined SUPSHIP and DCMC personnel levels required to perform the SUPSHIP mission, with
the combined organizations, at a level of service which closely approximates that which is
provided by the integrated SUPSHIP Project Teams today. We costed this analysis and given the
results, i.e., an additional 270 billets required to satisfy the SUPSHIP mission by delegating CAS
to DCMC, this was not considered a viable business alternative. To attempt to calculate an
appropriate business alternative, we extrapolated the workload analysis data from the Navy and
applied it in a mathematically different fashion. This is described as Alternative S-1A.
Under the Alternative S-1A scenario, the DCMC staff would be responsible for
performing contract administration, including assurance of contractor compliance with cost,
delivery, technical, quality and other terms of the contract. DCMC staff would also be responsible
for accepting products on behalf of the Government, and paying the contractor. These tasks are
closely tied to the daily operations of SUPSHIP, and would require direct and continuous
communications between SUPSHIP, DCMC, the contractor, the Type Commander, and the ship’s
crew.

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The SUPSHIP personnel, as on-site representatives of NAVSEA and the program
manager, would continue to maintain a close relationship with the ship owner/operator. They
would continue to sequence and integrate the work of the ship’s crew, and other Navy repair
activities with the shipyard's work. They would also continue to assist the ship’s crew in
overseeing contractor work and in ensuring fleet readiness and life cycle operability of the
completed ship. Their role in providing on-site field technical and engineering support would
continue as an essential part of the extension of NAVSEA's and/or the program manager’s
technical, contractual and programmatic authority and responsibility.
The resultant cadre of organizationally segregated SUPSHIP and DCMC personnel would
be required to interact closely. A constant, seamless coordination with each of the organizations
working in the waterfront environment would be mandatory.
2.4 Comparison of the Alternatives
2.4.1 Quantitative
The quantitative comparison to be made is the total cost of operations associated with the
management of Navy ship repair and new construction contracts, including total CAS functions
and additional non-CAS personnel, for the existing scenario and the proposed alternative. The
Booz·Allen study team members conducted a cost comparison of two alternatives for a 10-year
investment and operations period. These two alternatives are:
• Alternative S-SQ (Status Quo)--Alternative S-SQ is defined as leaving the CAS
function as the responsibility of SUPSHIP. SUPSHIP would continue to operate in the
same manner as they do today. More specifically, personnel in their existing roles
would accomplish the CAS, delegated CAS, and non-CAS workload.
• Alternative S-1A--Alternative S-1A is defined as DCMC taking responsibility for the
CAS functions at SUPSHIP. Under this scenario, some percentage of existing
SUPSHIP employees would become DCMC employees. The SUPSHIP non-CAS
workload would continue to be accomplished by SUPSHIP personnel.
The study team collected all necessary cost data to verify co-equal treatment and
comparison of the four alternatives. The comparison considered the following cost categories:
• Investment Costs
• Training
• Systems Interface Design
• Operations and Support Costs
• Recurring Training
• DCMC Personnel (Additional for New Construction)
• DCMC Personnel (Additional for Repair)
• SUPSHIP Non-CAS Personnel (Additional for New Construction)
• SUPSHIP Non-CAS Personnel (Additional for Repair)
• SUPSHIP CAS Personnel (New Construction)
• SUPSHIP CAS Personnel (Repair)

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The Basis of Estimate for these costs, the complete cost summary for each alternative, and
the monte carlo simulation are provided in Appendix E, SUPSHIP Detailed Cost Estimate and
Basis of Estimate.
2.4.1.1 Alternative S-SQ Costs
Alternative S-SQ captures the costs associated with continuing the existing operations. As
such, the only cost elements under this alternative are the SUPSHIP CAS Personnel (New
Construction) and SUPSHIP CAS Personnel (Repair).
SUPSHIP Facility New Construction CAS
Workyears (Status Quo)
Repair CAS Workyears
(Status Quo)
Bath 61.0 0.6
Groton 57.7 0.9
Jacksonville 1.5 56.8
New Orleans 87.7 20.7
Newport News 83.8 31.6
Pascagoula 85.4 15.9
Portsmouth 0 120.5
Puget Sound 0 25.9
San Diego 29.4 130
Figure 2-4 Status Quo: New Construction and Repair CAS Workload at SUPSHIP
The new construction CAS personnel costs are approximately $27.1 million per year and
the repair CAS personnel costs are approximately $26.8 million per year. For a detailed cost
estimate along with a basis of estimate, see Appendix E. For comparative purposes, the ten year
discounted cost for this alternative equals $446.3 million.
2.4.1.2 Alternative S-1A Costs
Under this alternative, the SUPSHIP CAS personnel become DCMC personnel. The
DCMC CAS personnel stay on-site and continue to function as members of the SUPSHIP Project
Teams. Compared to the status quo, the costs for this alternative are captured in different
elements, as described in the Basis of Estimate in Appendix E.
Investment costs were captured in this alternative. If the CAS personnel at SUPSHIP
became DCMC employees, we assumed that they would engage in limited DCMC training. This
was estimated at $2.7 million and was spread across the first two years. We further assumed
some system interface costs to connect SUPSHIP CAS information systems with DCMC’s.
These costs equaled $1M.
Based on the extrapolation of project team data that we received from SUPSHIP, the
number of new construction CAS workyears increases by 1.8% when the CAS and non-CAS
functions are separated. Applying the 1.8% to the CAS workyears at each SUPSHIP, a total of
410.8 workyears is required in this alternative. The cost for this element is $30.2 million per year.
See the Basis of Estimate and the spreadsheets in Appendix E for a more thorough description.

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SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
New Construction
CAS Workyears
(Alt S-1A, Partial)
New Construction
CAS Workyears
(Alt. S-1A, Full)
Bath 61.0 61.6 62.0
Groton 57.7 58.3 59.0
Jacksonville 1.5 1.5 2.0
New Orleans 87.7 88.6 89.0
Newport News 83.8 84.7 85.0
Pascagoula 85.4 86.3 87.0
Portsmouth 0.0 0.0 0.0
Puget Sound 0.0 0.0 0.0
San Diego 29.4 29.7 30.0
Total 406.5 410.8
*
414.0
Percentage Increase: 1.1% 1.8%
Figure 2-5 Comparison of Number of New Construction CAS Workyears for
the Status Quo and Alternative S-1A
Similarly, extrapolating project team data from the SUPSHIP model, the number of repair
CAS workyears increases by 3.5% when CAS and non-CAS are separated. A total of 417 work
years of CAS is required in this alternative as shown in Figure 2-6. The total cost of this element
is $30.4 million per year.
*
indicates number has been rounded.

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SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
New Construction
CAS Workyears
(Alt S-1A, Partial)
New Construction
CAS Workyears
(Alt. S-1A, Full)
Bath 0.6 0.6 1.0
Groton 0.9 0.9 1.0
New Orleans 20.7 21.2 22.0
Portsmouth 10.5 123.1 124.0
Puget Sound 25.9 26.5 27.0
San Diego 130.0 132.9 133.0
Total 402.9 411.8* 417.0
Figure 2-6 Comparison of Number of Repair CAS Workyears for
Separation of CAS and non-CAS impacts the non-CAS workyears required also. In this
alternative, the number of new construction non-CAS workyears increases by 1.6%, or a total of
12 workyears. Even though these are non-CAS costs, we had to capture them in this analysis as
incremental costs to DoD. This additional cost is estimated at $800,000 per year.

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SUPSHIP Facility
Total CAS Del and Non-
CAS New Construction
Additional Non-CAS New
Construction Workyears
(Alt. S-1A, Partial)
(Alt. S-1A, Full)
Bath 111.6 1.4 2.0
Groton 137.4 1.7 2.0
New Orleans 147.4 1.8 2.0
San Diego 43.2 0.5 1.0
Total 752.8 9.1
*
12.0
Figure 2-7 Comparison of Number of New Construction non-CAS Workyears for
Similarly, the repair non-CAS workyears increase by 5.9%. As shown in Figure 2-8, this
increase totals 65 workyears, for a total of $4.3 million per year. Even though these are non-CAS
costs, we capture them in this analysis as incremental costs to DoD when CAS and non-CAS are
separated. See the Basis of Estimate and the spreadsheets in Appendix E for a more thorough
description.
*

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SUPSHIP Facility
(Alt. S-1A, Full)
Bath 44.8 2.5 3.0
Groton 14.4 0.8 1.0
Portsmouth 296.5 16.3 17.0
San Diego 327.6 18.0 18.0
Total 1102.6* 60.6 65.0
Figure 2-8 Comparison of Number of Repair non-CAS Workyears for
2.4.1.3 Quantitative Comparison of the Alternatives
The discounted costs associated with delegating CAS to DCMC could range between
$504.8M to $612.8M. The most likely cost is $540M. These ranges are based on the monte
carlo simulation described in the methodology section.
SUPSHIP Status Quo
Discounted Cost
SUPSHIP Alternative
S-1A Present Value Cost
Low $446.3M $513.5M
Most Likely Cost $446.3M $549.1M
High $446.3M $614.3M
Figure 2-9 SUPSHIP Cost Comparison (10 Year Investment and Operations)

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SUPSHIP Cost Comparison (10 Years Investment and
Operations)
446.3
614.3
446.3
549.1
446.3
513.5
0
100
200
300
400
500
600
700
S-SQ S-1A
Alternative
DiscountedM$
High
Most Likely
Low
Figure 2-10 SUPSHIP Graphical Cost Comparison
The status quo alternative is clearly more cost effective. Over a ten year life cycle, the
cost estimate for the delegation of CAS to DCMC is approximately $100M more than the cost
estimate for the status quo, as shown in Figure 2-10.
2.4.2 Qualitative
The Booz·Allen study team applied the qualitative factors, described in Section 1.4.3.5
above, to the two alternative scenarios. This section describes the results of the qualitative
comparison of the proposed CAS alternative to the status quo. For convenience, Figure 2-11
repeats the relative weights assigned to each factor through the process described in Section
1.4.3.5.
FACTOR WT
Achievement of Mission Objectives 22%
Subject Matter Expertise of CAS Staff 18%
Timeliness 16%
Ability to Recruit, Assign, Develop, & Retain Staff 12%
Synergy with the Non-CAS Functions 10%
One Face to Industry 9%
Independence of CAS Functions 5%
One Face to Customer 4%
Expedience of Adopting/Implementing Acquisition CAS Reforms 4%
Figure 2-11 Weighted Value of Qualitative Factors

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The result of the qualitative comparison indicates that the Status Quo was assessed to be
more than 50% better at satisfying the qualitative factors than transferring CAS to DCMC.
0.757
0.243
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Status Quo DCMC
SUPSHIP
Qualitative Analysis Results
Figure 2-12 Qualitative Comparison of CAS Alternatives
"Achievement of Mission Objectives" was determined to be the most important qualitative
factor. The study team determined that the status quo operation was better able to achieve
SUPSHIP’s mission. The other factors either provide support to achieve the mission objective,
such as timeliness and subject matter expertise, or contribute to the professionalism and discipline
of performing Government contract administration, such as one face to industry and the
expedience of adopting acquisition reform.
The main considerations in determining the relative qualitative preferences are 1) the “as-
is, where is” manner in which the transfer will be executed, and 2) the organizational division
created on the waterfront with the introduction of another Government activity in waterfront
operations. The unique nature of the work environment and trade skills involved cause DCMC to
accomplish the transfer in this "as-is, where is" manner. However, use of former SUPSHIP
personnel by DCMC limits value added which might be gained through the use of DCMC
personnel who have more formal CAS experience and training.
One major impact of this scenario is that it precludes large-scale consolidation of the
transferred CAS functions within the existing structure of DCMC. Expectations for streamlining
and reductions in personnel must be tempered by the reality that this segment of DCMC is not
easily integrated into the mainstream organization, either functionally or culturally. Working in the
waterfront environment, alongside the Navy crew, remaining SUPSHIP personnel, other Navy
repair and modernization teams and program management representatives, is a different milieu
than currently found anywhere in DCMC.

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The transfer of SUPSHIP personnel to DCMC would create an unusual relationship
between the Government activities assigned to oversee the contract. The introduction of another
Government agency on the waterfront, working closely with the contractor, the ship’s crew and
the other Navy repair and modernization teams, would add a level of complexity to the required
communications and legal responsibilities. These additional relationships are envisioned to have a
significant impact on the successful execution of contracts in a timely, cost effective manner.
This increase in the number of personnel involved in daily operations complicates
communications, creates multiple and complex relationships on the waterfront and increases the
risk associated with completion of an operationally ready ship, on time and within cost. The
alternative organization would be less efficient due to the loss of flexibility and synergy currently
achieved by having members of the same SUPSHIP organization perform these functions.
Regarding the "One Face to Industry" qualitative factor, Navy ship repair and new construction
presently interfaces with one DoD CAS organization, NAVSEA, through the SUPSHIP offices.
In the alternative scenario, there would be two organizations interfacing with the shipyards, one
for strictly CAS functions, and the other for technical, program management and customer
coordination. The customer would also be dealing with two or more governmental organizations.
2.5 Recommendation
In summary, this model shows that more personnel (SUPSHIP and DCMC) will be
required to accomplish the existing CAS, and non-CAS workload under the evaluated alternative
scenario. The reasons for this are a combination of the following:
• The multiple trade skills involved in project management
• The loss of efficiencies realized through the synergy and cross utilization of these skills
in the Project Management Team, and
• The need to create additional billets to align CAS and non-CAS workload with the
personnel assigned to the two distinct organizations.
This analysis supports the recommendation to retain CAS responsibility for Navy ship new
construction and repair under SUPSHIP/Navy cognizance. The quantitative and qualitative
analyses both show this alternative to be the most favorable. The additional costs to DoD, without
qualitative benefit and with an increase in risk, is substantial justification for leaving the CAS
responsibility under SUPSHIP.

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3 Office of Naval Research
3.1 Background and Mission
The Office of Naval Research (ONR) coordinates, executes, and promotes the science and
technology programs of the United States Navy and Marine Corps through universities,
Government laboratories, and nonprofit and for-profit organizations. It provides technical advice
to the Chief of Naval Operations and the Secretary of the Navy, works with industry to improve
technology manufacturing processes while reducing fleet costs, and fosters continuing academic
interest in naval relevant science from high school through post-doctoral levels.
The Office of Naval Research University Business Affairs Division (UBA) (ONR 24) is
responsible for establishing and maintaining effective business relationships between ONR and the
university research community. The office carries out contract and grant administration, indirect
cost rate negotiations, business system reviews and quality assurance responsibilities. UBA
administers contracts and grants (with educational and nonprofit institutions) issued by ONR, as
well as by the Department of Defense (DoD), the Army, the Air Force, the National Aeronautics
and Space Administration (NASA), Department of Energy (DOE), and other Federal agencies. In
1997, the Department of Defense alone awarded $2.3B in grants to universities and nonprofit
organizations, of which 96% were administered by ONR.
A major role for UBA is the development of DoD-wide policies; procedures and
objectives associated with contract and grant administration and indirect cost rates at educational
institutions. In addition, the office conducted the first testing of Electronic Data Interchange
(EDI) and Electronic Funds Transfer (EFT) for invoicing and payments under contracts and
grants with educational institutions within the Department of the Navy. This electronic payment
method dramatically reduces paperwork requirements, improves cash management, and speeds
payments to grantees and contractors.
3.1.1 ONR Authority
ONR, established by law in 1946, is charged to perform duties prescribed by the Secretary
of the Navy relating to:
1) The encouragement, promotion, planning, initiation, and coordination of naval research;
2) The conduct of naval research to assist with the research and development conducted by
other offices and agencies of the DON; and
3) The supervision, administration, and control of activities within or for the DON relating to
patents, inventions, trademarks, copyrights, royalty payments, and matters connected
therewith.
3.1.1.1 Authority for Grant and Contract Administration with Educational
Institutions and Non-Profits
ONR provides Grant and CAS (G&CAS) for other Navy, DoD, NASA and other Federal
agencies when appropriate. The G&CAS functions include contract and grant post-award
management at all educational institutions for DoD and for other Federal agencies on a cost
reimbursable basis.

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In a July 31, 1966, memorandum to the Assistant Secretary of the Navy for Research and
Development, the Assistant Secretary of Defense for Installation and Logistics, assigned ONR as
the DoD representative for field administration services for contracts and grants with educational
institutions located in the United States, Alaska, Hawaii, Canada, Puerto Rico and the Virgin
Islands.
3.1.1.2 The Department of Defense Grant and Agreement Regulation
The DoD Grant and Agreement Regulations (DoDGARs), DoD 3210.6-R, assigns the
responsibility for performing field administration services for grants and cooperative agreements.
Specifically, it designates ONR as the administrator of grants and cooperative agreements for the
following:
1) Institutions of higher education and laboratories affiliated with such institutions, to the
extent that such organizations are subject to the university cost principles in OMB
Circular A-21.
2) Non-profit organizations that are subject to the cost principles in OMB Circulars A-
122, if their principle business with the DoD is research and development.4
The DCMC and its field offices have responsibility of administering grants and cooperative
agreements for all other organizations to include:
1) For-profit organizations.
2) Non-profit organizations identified in OMB Circular A-122 that are subject to for-
profit cost principles in 48 CFR part 31.
3) Non-profit organizations subject to the cost principles in OMB circular A-122, if their
principal business with the Department of Defense is other than research and
development.
4) State and local Governments.
3.1.1.3 Federal Directory of Contract Administrative Services Components
The Federal Directory of Contract Administration Services Components, dated February
1999, identifies the component assigned to provide G&CAS within a designated geographic area
or a specific contractor plant. This directory is maintained by DCMC and its use is mandatory by
all DoD agencies. Section 2A of the directory identifies ONR regional offices as the performer of
CAS functions to universities within their respective geographic areas.
3.1.2 ONR Contract and Grant Post Award Administration Organization
The UBA Division (ONR 24) has the overall responsibility for managing the post award
grant and contract administration functions. There are currently 81 staff in the UBA division, of
which 23 Full Time Equivalents (FTEs) are reimbursable from NASA to support grants
administration. The UBA staff is focused primarily on the performance of G&CAS, but also
support policy making, project management, university relations and training. ONR UBA offices
are located at ONR Headquarters in Arlington, VA; 5 regional offices located in Atlanta, Boston,
4
DOD 3210.6-R, DOD Grant and Agreement Regulations

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Chicago, San Diego and Seattle; and 4 Engineering Support Offices. Figure 3-1 shows the UBA
organization.
Systems Review
Boston
Chicago
Austin
Albuquerque
Engineering Services
Field Operations Branch
ONR 241
Indirect Cost Branch
ONR 242
Atlanta 243
Boston 244
Chicago 245
San Diego 246
Seattle 247
ONR Regional Offices
University Business Affairs
ONR 24
Figure 3-1 ONR University Business Affairs Organization
3.1.2.1 Headquarters and Field Operations (ONR 241)
The ONR 24 Headquarters manages the Regional Offices and develops, coordinates, and
implements contract administration policies and procedures. The Field Operations Branch
provides specialized support to the regional offices in the areas of contractor business systems
monitoring, property administration, quality assurance, safety surveillance, and engineering
services. The Field Operations Branch includes staff at Headquarters, Boston, MA, Chicago, IL,
Austin, TX and Albuquerque, NM. The field operations support branch is comprised of:
1 Supervisory Contracts Specialist GM-1102-15
2 Supervisory Procurement Analysts GS-1102-14
4 General Engineers GM-801-13
2 Contract Specialists GS-1102-13
1 Secretary GS-0318-06
The Field Operations Support Engineers work with procuring activities to ensure that
hardware and software deliverables from universities meet Government contract requirements. In
support of ONR's negotiation of indirect cost rates at ONR cognizant universities around the
country, the engineers also lead a multi-agency Government team in the review of Utility Cost
Allocation Studies (UCAS).

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ONR has also assisted in developing policy specific to grants administration for
universities and nonprofit organization. They have taken an active role in the FAR part 45 rewrite
for Government Property related to non-profits and universities and have participated in the
development of the DoD Property Manual. Additionally, ONR is in the process of developing
training regarding DoD grants administration training offered through the Defense Acquisition
University.
ONR provides the Government Administration Representative to the Executive
Committee and chairs the Terms and Conditions Committee for the Federal Demonstration
Partnership (FDP), which is a consortium of 65 universities and 7 non-profit members. The
mission of the FDP is to make the research enterprise work better by removing from researchers
any unnecessary bureaucratic burdens while ensuring there are necessary safeguards to protect
against fraud. Also unique to the basic research of universities are policies addressing the use of
human and animal subjects.
The Field Operations Branch is responsible for managing the ONR programs for oversight
of property and purchasing systems at universities and non-profit organizations assigned to ONR
for field contract administration. The Branch conducts Property Control System Analyses (PCSA)
and Contract Purchasing System Reviews (CPSR). A PCSA is a review of an Institution’s
property control system performed to determine whether it is capable of controlling, protecting,
preserving and maintaining Government property. A CPSR is an onsite review of an institution's
purchasing system. The objective of a CPSR is to evaluate the efficiency and effectiveness with
which the institution spends Government funds and how well it complies with Government policy
when subcontracting. The review provides the ACO with a basis for granting or withdrawing
approval of the institution's purchasing system.
At least once every three years, the ONR ACO performs a risk assessment for each
institution with annual expenditures from DoD and NASA awards in excess of $25 million. The
ACO considers the volume, complexity and dollar value of the institution's purchasing and
subcontracting activity and the institutions past performance (e.g. prior CPSRs or independent
audits). Based on the ACO’s recommendations, the Branch develops an annual CPSR schedule.
3.1.2.2 Indirect Cost Branch (ONR 242)
The Indirect Cost Branch plans and exercises control over the quality and responsiveness
of the indirect cost and contract audit resolution programs. These programs encompass the
preparation, negotiation, execution, and administration of indirect costs, cost accounting
standards determination and other accounting and allocation issues at assigned educational
institutions and nonprofit organizations.
The Indirect Cost Branch is located at ONR headquarters and is comprised of the
following:
1 Supervisory Contract Specialist GM-1102-15
1 Contract Specialist GS-1102-14
1 Contract Cost/Price Analyst GS-1102-13
1 Grants Specialist GS-1101-09

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The Indirect Cost Branch assists the Office of Management and Budget, (OMB) in the
development of policy in regard to university and non-profit organizations. Specifically, they have
assisted in the development or revision of OMB Circulars A-21, A-122, and A-133, which
provides guidance to universities and nonprofit organizations in regard to applicable cost
principles and Cost Accounting Standards. ONR also provides support to the National Research
Council, library and utility studies working groups and to such groups as Council on Government
Relations, Office of Science and Technology Policy (OSTP) and the Presidential Review Directive
(PDR) on Government/University Partnership.
3.1.2.3 ONR Regional Offices
The mission of the ONR regional offices is to plan and exercise management control over
the quality, responsiveness, and proper administration of contracts, grants and other assistance
agreements at educational institutions and non-profit organizations for ONR, DON, DoD, and
other Federal Agencies.
Each of the 5 regional offices has the following labor categories, which vary in number:
Regional Director/Supervisory Contract Specialist GS-1102-14
Contracts Specialists GS-1102-12
Grants Specialists GS-1101-09
Procurement Technicians GS-1106-07
Administrative Support GS-0303-07
Personnel at the regional offices are assigned to support an educational institution or non-
profit for a maximum of three years. At the end of the three years, personnel are rotated to a
different institution to avoid the appearance of, or potential for, conflicts of interest.
3.1.3 Current University Business Affairs Functions
The Figure 3-2 below describes functions and sub-functions performed by the ONR
Regional Offices as they relate to university business affairs.

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FUNCTION SUBFUNCTIONS
Process Payment Requests • Use both EDI and manual means to certify payment
of vouchers
• Work with universities to correct errors in voucher
submissions
Negotiate Indirect Cost Rates • Establish rates (predetermined, fixed with carry
forward, final or provisional) at assigned
Universities
Closeout Contracts and Grants • Solicit awardee for required deliverables and forms
• Counsel awardee about the closeout process
• Ensure awardee submittals meet the administrative
requirements of the terms and conditions of the
grant
• Contact program management for formal
acceptance of deliverables or facilitate necessary
changes to the deliverable
• Complete relevant forms, certifications, releases,
review and acceptance of final cost for final
closeout
Resolution of Audit Findings • Determine allowability of direct and indirect costs
• Determine appropriate cost classifications or
allocation methodologies
• Make determinations on Cost Accounting
Standards adequacy or non-compliance, and
equitable adjustments
• Resolve questioned deficiencies relative to system
reviews
• Provide guidance/direction to institutions or
auditors on implementation of applicable Cost
Accounting Standards
Educate/Train University Personnel • Advise universities regarding grant and contract
terms and conditions
• Provide guidance regarding OMB Circular A-110;
Property issues, e.g., title, inventory, and disposal;
Standards for purchasing/procurement/ property
systems reviews; and grants and assistance policy
Track Funds Expenditures • Track expenditures of universities
• Alert program officials of low expenditure rates
• Alert placement offices to cash management
deficiencies
• Support DoD participation in Government- wide
efforts to reform university payment processes
Support Program Management • Provide support to program managers for
administrative issues
• Award incremental funding, no cost funds
extensions, and other administrative modifications
• Provide periodic reporting regarding expenditures
Administer Property • Provide guidance on disposition of property
• Provide inventory management
• Provide title management
Figure 3-2 ONR Regional Office Functions and Sub-functions

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3.1.4 Changes in Operations Over Last 10 Years
In an attempt to become more effective in response to Government mandates for staff
reduction and streamlined processes, ONR began reengineering their processes and procedures
for conducting and administering Government research programs. ONR consolidated offices
located on college campuses to regional offices, implemented a paperless acquisition process and
streamlined administrative and business procedures.
3.1.4.1 Regionalization
In 1988, ONR began consolidating its field locations. Previously, ACOs were located on
college campuses. This had been convenient when scientific research programs first came into
being, but universities no longer needed such intense assistance on campus. Universities still
benefit from the expertise provided by the field office located in their region.
These field offices were strategically established to evenly distribute universities among
them. In addition to creating regional offices, the Field Administration Office and the Indirect
Cost Branch were created and moved to ONR HQ. Figure 3-3 identifies the current locations of
each regional office and its relationship to the previously maintained resident offices and ONR
detachments. As a function of regionalization and application of a risk-based approach to
G&CAS, which facilitated the regional restructuring, ONR has been able to close 11 offices, cut
the workforce in half, and double its caseload (measured in terms of number of grants and
contracts administered).
16
13
5
FY 88 FY 93 FY 99
- 69% Sites
94
146
342
FY 88 FY 93 FY 99(est)
+ 264% Caseload Increase
Field Offices
Productivity
Regional Offices: FY 99
SINCE 1988 ONR HAS:
- Closed 11 Offices
- Reduced billets by 51%
- Doubled Caseload
ONR’s REENGINEERED ACO STRUCTURE
Detachments: FY 88
Residencies: FY 88
Boston
Det
ATLANTA
Austin
Albuq.
SAN DIEGO
LaJolla
Pasadena Det
CIT
Stanford
Berkeley
SEATTLE
CHICAGO
Columbus
NY
BOSTON
MIT
Draper
24-16c5/Nasa 2/19/99
NAS
Figure 3-3 ONR Regional Office Structure

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3.1.4.2 Paperless Acquisition Process
The Contract Administration Management Information System (CAMIS) was originally an
ONR stand-alone system with terminals resident at ONR HQ and the ONR regional offices for
purposes of contract administration. ONR added an expenditure-tracking model to CAMIS.
Later, CAMIS was integrated into another ONR developed system, the Integrated Naval
Research Information System (INRIS). INRIS became the backbone for business operations for
ONR. In addition to CAMIS, INRIS includes the following modules:
• Science and Technology Module
• Financial Systems (including STARS)
• Corporate Operations Systems
Currently, the award and administration of grants and contracts is a combination of
manual and electronic processes. The goal of ONR is to be paperless by the year 2000. They
currently conduct 80% of their processes electronically.
To fulfill the paperless goal, ONR is pursuing an Electronic Data Interchange/Electronic
Funds Transfer (EDI/EFT) system. ONR’s EDI/EFT system was developed as a joint venture
between ONR, Defense Finance and Accounting Service (DFAS), Massachusetts Institute of
Technology (MIT) and the University of Southern California between 1989 and 1991. Since then,
the system has processed thousands of invoices and hundreds of millions of dollars at universities
and research non-profits. Three primary benefits have emerged due to the EDI/EFT system, which
are:
1) Higher quality reviews of vouchers – the automated checks are performed on a 100%
inspection basis vs. the typical sampling method used by necessity on manual vouchers.
Since more than one review takes place, mistakes are rarely are missed.
2) Improved expenditure rates – ONR’s experience has been that EDI/EFT paid awards have
a 10 percentage point better expenditure rate at year’s end to similar awards not paid
using EDI/EFT.
3) Error reduction – because payment to obligation matching processes are automated,
EDI/EFT eliminates unmatched disbursements and other problems.
3.1.4.3 Process Improvements
ONR has streamlined the administrative and business procedures for Federally sponsored
research. ONR has achieved commonality in the following areas:
• Proposal forms
• Electronic proposal format
• Hardware, software, and Database Management Systems
• EDI/EFT standard processes and formats
A recent study evaluated the reduction of bureaucratic red tape at 28 academic
institutions. Several streamlining benefits were noted. Normally, Principal Investigators at colleges
and universities spend 10% to 20% of their time on administrative matters required by the
conditions of federal sponsorship. Due to ONR's participation in Federal streamlining initiatives,
the majority of the principle investigators surveyed reported spending 15% less time on
administrative tasks.

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3.2 Status Quo
For purposes of this study, the Status Quo scenario is defined as ONR retaining the
administration of contracts and grants issued by ONR, entities within DoD to include the Army
and Air Force, NASA, and other Federal agencies with educational and nonprofit institutions.
ONR has developed methods to administer grants, which are a combination of FAR Part
42.302, the DoDGARs Part 22, and unique business processes. In general, regional offices
process payment requests, perform reviews of university business systems, assist in negotiating
indirect cost rates at certain institutions, close out awards, and provide general assistance and
information on business matters.
Currently, UBA has 81 staff. ONR has a specified target to reduce UBA staffing to 76 by
2001. Based on historical data and interviews with ONR, future reductions in G&CAS staff are
projected at the rate of 3.5% per year. Accordingly, the total number of FTEs required to perform
these functions will be approximately 55 by 2009 in the status quo.
3.3 Alternative CAS Scenarios
The Alternative scenario is defined as transferring the G&CAS functions from ONR to
DCMC. Under this alternative, ONR G&CAS personnel would become DCMC employees and
would physically relocate to a DCMC office. Booz⋅Allen interviewed DCMC officials on how
contracts and grants would be administered with universities and nonprofit organizations under
this alternative scenario.
The following assumptions were made regarding the transfer of G&CAS from ONR to
DCMC:
• The total staff transferred from ONR is 73
• For the first year, people and functions would continue "as-is, where-is" under DCMC
cognizance
• ONR will retain 3 FTEs from their HQ staff to perform UBA functions such as policy
formulation, representation to boards and councils, and other project administration
• In years two through ten, a 10% reduction in new DCMC (i.e. the former ONR)
personnel performing grants and contracts administration is assumed
• The first year of the transition, DCMC would conduct business as usual
For this comparison, we interviewed ONR personnel, as well as representatives of
universities, customers (internal and external to ONR), OMB and DCMC. We determined the
types of services ONR provides, their customer satisfaction, and the ramification of having
G&CAS functions transferred to DCMC.
3.4.1 Quantitative Comparison of Alternatives
The quantitative comparison addresses the total cost of operations associated with the
performance of G&CAS functions by ONR, i.e. the Status Quo, compared to the total cost of
operations associated with the proposed alternative of delegating the G&CAS functions currently
performed by ONR to DCMC. The Basis of Estimate for all costs identified, the complete cost
summary for each alternative, and the monte carlo simulation are provided in Appendix F.

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Total discounted costs for the status quo scenario for the ten year cycle are estimated at
$43.0 million. For this scenario, the cost of training is included in the ONR burden rate. There are
no investment costs. The only cost incurred is the cost of ONR personnel. ONR personnel costs
were estimated by determining the number of FTEs that are funded out of the ONR budget, which
includes the 23 reimbursable billets from NASA, multiplied by the ONR burden rate.
Total costs for the alternative scenario for the ten year cycle is estimated at $43.7 million.
Investment cost for this alternative includes initial training of newly transferred DCMC employees
and systems interface design. We estimated $244,000 for initial training, which was allocated
across two fiscal years. We assumed that the newly transferred DCMC employees were already
trained to perform their G&CAS functions, however, they may be required to participate in some
DCMC-specific training. We also assumed that other training within the scope of the G&CAS
function would be included in the DCMC burden rate.
We estimated $1 million for systems interface design. This takes into consideration the
data conversion effort and the hardware or software interface cost to integrate CAMIS and the
DCMC information systems. This figure was discussed with DCMC systems staff, who concurred
that the interface costs could reasonably be $750,000 to $1.5 million.
The majority of the costs are captured in operations and support. The greatest costs were
attributed to total personnel, estimated to be $6.7 million per year for the 73 FTEs transferred to
DCMC and the 3 FTEs retained at ONR. For years 2002 through 2009, we assumed a 10%
annual reduction of the DCMC staff. For risk analysis purposes, we assumed a range of FTE
reductions from 0 – 20%. The rationale behind this assumption was to capture the natural attrition
experienced at DCMC plus the anticipated efficiencies of the consolidation with DCMC.
Subsequent to these calculations, DCMC advised that FTE reductions of 1 – 5% per year would
be more realistic. We did not recalculate the cost based on this new information as it would make
this alternative quantitatively less attractive and would not have altered the recommendation.
A comparison of the costs discussed above, and shown in Figure 3-4 reveals that
maintaining the Status Quo is the most cost effective solution.
Status Quo Alternative 0-1B
Low $43.0M $34.7M
Most Likely $43.0M $43.7M
High $43.0M $58.0M
Figure 3-4 ONR Cost Comparison (10 year Investment and Operations)

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ONR Cost Comparison (10 Years Investment and
Operations)
43.0
58.0
43.0 43.743.0
34.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
O-SQ O-1B
Alternative
DiscountedM$
High
Most Likely
Low
Figure 3-5 ONR Graphical Cost Comparison
3.4.2 Qualitative Comparison of Alternatives
We developed a set of qualitative factors to evaluate the effect of the alternative proposal
on the performance of G&CAS functions for ONR. Section 1.4.3.5 describes these factors, the
methodology used to incorporate them into the decision making process, and the application of
the methodology to this study. This section describes the results of that qualitative comparison.
The qualitative value of both scenarios was determined by evaluating each of the qualitative
factors according to how well it was satisfied by either of the two alternatives.
The bar graph below depicts the overall results of evaluating the status quo against the
alternative scenario for each of qualitative factors. These factors were evaluated with the long-
term picture in mind, that is, we did not just consider the first year or two of the transition.
Qualitatively, maintenance of the status quo is the preferred alternative. It was evaluated as over
40% more likely to satisfy the qualitative factors.

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0.714
0.286
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Status Quo DCMC
Office of Naval Research
Qualitative Analysis Results
Figure 3-6 Qualitative Results
We considered nine factors in the qualitative evaluation, of which, the following three
were collectively worth over 50% of the qualitative score: achievement of mission/objectives,
subject matter expertise of G&CAS staff, and timeliness. On all three of these factors, the Status
Quo was rated very highly.
The most heavily weighted qualitative factor is "achievement of mission objectives",
weighted at 22% of the total qualitative score. The main objective of ONR’s UBA Division is to
establish and maintain effective business relationships between ONR and the university research
community. The primary, but not sole, basis for interaction between UBA and the university is
UBA's contract and grant administration function. The primary purpose of DoD research awards
to universities is to perform research in areas that will continue to provide technological
superiority in the future for the U.S. military. Consequently, ONR was scored highly on their
ability to satisfy this criteria as ONR's involvement from origination to closeout of university
research projects directly supports the overall ONR mission, namely:
• Encourage, promote, plan, initiate and coordinate naval research
• Assist with the research and development conducted by ONR and other offices and
agencies
• Supervise, administer, and control activities within, or for, the DON relating to
patents, inventions, trademarks, copyrights, royalties and matters relating to naval
research
ONR has developed their subject matter expertise in grants administration for universities
and non-profit organizations from decades of support to this focused community. Their execution
of grants and contract administration functions is largely transparent to the performers and
customers, oftentimes because ONR provides more than purely G&CAS. Services the ONR

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regional representatives provide to their customers beyond the scope of grants and contract
administration include:
• Facilitating and integrating EDI/EFT into current business processes
• Training of university staff in grants and assistance policy and administration
• Assisting universities in resolving audit findings
• Tracking funds expenditure rates
• Participating in policy formulation and maintenance which is specific to university and
nonprofit organizations
• Assisting customers in overall project management
ONR regional representatives knowledge and expertise and on-going experiences are fed
back into the rest of ONR to strengthen the overall ONR understanding and expertise with regard
to university research. This constant communication process between the field and the
Headquarters strengthens ONR in their leadership role in the university community, such as,
providing the Government representative on the Federal Demonstration Partnership Board and
the Chair of the Terms and Conditions Subcommittee.
ONR was rated very highly by their customers, as well as the research community, in their
timeliness. ONR's focus on the university community and UBA's dedication of a particular
regional representative to a specific university facilitates their responsiveness, which we defined as
a subset of timeliness. Based on current experience, customers and university representatives felt
strongly that the small streamlined staff at ONR helps eliminate bureaucratic bottlenecks that
might otherwise cause unnecessary delays in decision making. Customers and performers are able
to access ONR staff at a higher level in the organization and get issue resolution faster at ONR
than is typically experienced in other organizations.
All parties contacted agreed that DCMC would have the capability to perform these
G&CAS functions, especially with the transfer of ONR staff. However, ONR customers and
university performers feared that, without changes to DCMC's current methods of operation, the
university R&D projects would “get lost” at DCMC. The comparatively low dollar value of the
research contracts and grants would relegate many of them to DCMC’s automated processes with
a dramatic reduction in access to staff to help resolve issues and handle problems. While the
G&CAS functions would be performed effectively at DCMC, the level of service, including non-
G&CAS functions, that customers and performers are receiving from ONR today would be
diminished. Of particular concern is the long-term effect on the university basic research program.
It is believed that the university research program is out of the mainstream of DCMC business and
comparatively insignificant to warrant the time and focus that the community receives from ONR
today. With more of the burden falling on the performers, an increase in the percentage of dollars
applied to basic research would be diverted to administration and away from research.
ONR estimated that a minimum of four FTEs at ONR headquarters, for a total of seven
(7) ONR UBA staff, would approximate the level of service provided today, should G&CAS be
delegated to DCMC. The 10 year discounted cost of this alternative was estimated to be $53.9
million. This was not offered as an alternative since a more expensive alternative with additional
staff was not considered a viable alternative.

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3.5 Recommendation
The 10-year discounted costs associated with the Status Quo ($43.0 million) and
Alternative 0-1A are extremely close ($43.7 million). The ranges of costs indicate that
Alternative 0-1A might be more cost effective on the "low-end" ($34.7 million). In such a close
cost picture, we look to the qualitative analysis to determine the superior alternative. The
qualitative analysis discussed above indicates a clear preference for maintaining the status quo,
leaving administration of university grants and contracts with ONR.

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4 Army Ammunition Plants
4.1 Mission and Background
The Army is the Single Manager for Conventional Ammunition for the Department of
Defense. Under the overall command and control provided by U.S. Army Industrial Operations
Command (IOC), a subordinate organization of the U.S. Army Material Command, the
Government-Owned, Contractor-Operated (GOCO) Army Ammunition Plants (AAP) produce a
variety of ammunition and ammunition products for use by Federal government personnel.
Seven active plants produce various completed and intermediate products including small
and large caliber ammunition, mortar and artillery rounds, gunpowder, pyrotechnics, and high-
power explosives. There are fourteen “inactive” plants that can best be described as follows:
• Four Army Reserve Plants capable of rapid reconstitution to meet mobilization surge
• Three inactive stand-by plants that, if needed, can be reconstituted
• Two excess plants that are no longer needed (Joliet and Alabama)
• Five excess plants that are no longer needed but require ongoing environmental
remediation
Both active and inactive plants continue to be challenged by environmental remediation
and demilitarization requirements. Many of these challenges will require as many as 20 years for
full resolution.
The Armament Retooling and Manufacturing Support (ARMS) act passed by Congress in
1992 allows businesses to use "idle" capacity and capability at AAPs including land, buildings,
equipment, utilities, communications, and transportation. Fifteen active and inactive plants have
ongoing ARMS initiatives.
The 19 plants, excepting the two that are excess, are located in seventeen states with
primary geographic concentration in the eastern and central United States. Twelve different
contractors operate production facilities at these 19 active and inactive sites. Two sites, the Joliet
AAP at Joliet, IL and the Alabama AAP at Childersburg, AL have no present ammunition-
related/land management contractor operations. Additionally, the Alabama AAP was declared
excess as part of the 1989 Base Realignment and Closure Commission recommendations. Refer to
Appendix G, Tables G-1a and b, for a complete description of the active and inactive AAPs.
The IOC GOCO AAPs are military installations/activities under the jurisdiction of the IOC
Commanding General. In this regard, the AAP commanders and commander’s representatives are
responsible for performing, or requiring to be performed, various contract administration services
(CAS). The authority to execute this responsibility is evidenced by formal delegation from an IOC
Contracting Officer to act as a contracting officer’s representative (COR) or as an administrative
contracting officer (ACO) as stated in IOC regulations5
.
5
The IOC Regulation 10-8, Organization and Functions, Active Army Ammunition Plants, 20 Jun 1997 and IOC Regulation
10-9, Organization and Functions, Inactive and Excess Army Ammunition Plants, 3 Jul 1997

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4.1.1 AAP Staffing
Organizationally, Army officers command active plants while Department of the Army
Civilian (DAC) commander’s representatives manage inactive plants. Staff size ranges from 22-30
military and civilian personnel at the active plants and from three to fourteen DACs at inactive
plants. Organizational structure at the individual active plants is primarily functional in design
(e.g., contract administration, safety, engineering, transportation, quality assurance, etc.). The
structure at the inactive plants is less well defined due to a variety of special circumstances (e.g.,
designation of the plant as an Army Reserve Plant, standby inactive plant, or excess to IOC).
Operationally, staffing at active plants primarily consists of two military personnel (a
commander and an executive officer) who provide overall command and control and DAC staff
who, generally, perform single functional responsibilities. Staffing at inactive plants consists of a
DAC commander’s representative who provides command and control and DAC staff who often
perform multiple functional responsibilities. Individual inactive plants’ DACs typically perform
multiple duties such as safety and security or quality assurance and transportation management.
Additionally, highly specialized positions, such as agronomists, are shared across nearby plants.
Whether positions are designated as multiple functional type or shared type, the AAPs are
achieving their operational staffing goals. Note that this “multi-tasking” of DACs at inactive
plants relates more to reduced/cessation of production and concomitant position attrition than by
intentional design. Operational staffing at inactive plants is more a matter of “achieving adequate
coverage of the work” within existing resources. The U.S. Army Industrial Operations Command
(IOC), Rock Island, IL delegates performance of CAS to plant commanders and Government
representatives.
While the individual active and inactive plants perform day-to-day contract administration,
the IOC provides formal contracting office support for the AAPs. Procuring Contracting Officers
(PCO) at the IOC execute contract modifications and perform official contracting officer
functions. The CAS6
needs are typically identified by the individual AAP staffs and are
communicated to the IOC staff for formal action. Due to the proximity of the AAP staffs to the
contractor, regular interaction between the AAPs and IOC is necessary to resolve issues in a
timely manner.
4.1.2 Recent Downsizing
Since 1993, IOC has identified and implemented downsizing projects that have reduced
ammunition plant maintenance requirements and costs including:
• Decontaminating and selling excess equipment
• Removing sensitive items
• Documenting excess real property
• Deactivating utilities
• Removing asbestos
• Consolidating activities
• Closing buildings
6
These CAS functions are typical of those described in the FAR Part 42, Contract Administration and Audit Services.

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Additionally, plant maintenance costs have been reduced by streamlining maintenance
requirements and by negotiating contracts more rigorously. The IOC has increased the number of
technical staff members who evaluate and annually negotiate maintenance contracts. This often
results in reduced costs by negotiating reductions in the number of contractor personnel.
4.1.3 Acquisition Reforms
At present, the Department of the Army’s acquisition strategy and choice of contract type
for ammunition production is transitioning from Cost Plus (CP) to Firm-Fixed Price (FFP). Much
of this transition is due to an acquisition reform imperative that articulates, “The private sector,
today, can reasonably and adequately perform to specified levels of quality and timeliness without
the need for additional incentive.” While acquisition reform is attempting to achieve more
streamlined processes at the PCO level, it is unclear as to the impact at the ACO level.
Additionally, under FFP contracts, formal contract modifications will be required for any change
in scope of work. Hence, it is anticipated that overall AAP CAS workload could actually increase,
over time, as FFP replaces CP contracts.
4.2 Definition of the Status Quo CAS Operations Performed at the AAPs
4.2.1 The Active AAPs
Functionally, active AAP military and civilian personnel provide a range of post-contract
award CAS, contractor production and landowner management oversight at the several AAPs. A
review of FAR Part 42 indicates that while some of the AAP staff functions are readily identifiable
as CAS, others lie outside the scope of CAS as defined by the FAR. According to the official IOC
mission and functions document7
, the active AAPs perform installation management and contract
administration over a contractor operated installation. Hence, many of the functions performed by
the Government staff are either directly or indirectly related to the performance of CAS.
Figure 4-1 describes functions and subfunctions performed by the active AAPs
Government staff related to FAR Part 42, Contract Administration and Audit Services.
7
The IOC Regulation 10-8, Organization and Functions, Active Army Ammunition Plants, 20 Jun 1997

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FUNCTION SUBFUNCTIONS RELATED TO FAR 42
Contract administration and financial support • Cost and price analysis
• Contract audit
• Review of cost based proposals
• Contract modification
• Negotiation
• Purchasing review
• Statement of Work review
• Technical evaluation
• Labor relations
Equipment management • Oversight of contractor equipment utilization
• Oversight of equipment planning and disposal
Traffic management • Shipment planning and GBL reviews and reports
• Contractor technical assistance
• DOT Law Review
• Demurrage/detention tracking and payment
program
• Demilitarization (field service planning and
reporting)
• Container control
• Contractor traffic office/depot evaluation
• Carrier performance program review
Quality • Product acceptance documentation
• Program/process/product audit
• Corrective action
Figure 4-1 Active Plants' FAR Part 42 Functions/Subfunctions
4.2.2 The Inactive AAPs
Of the 14 inactive plants8
, four are Army Reserve Plants, three are inactive standby
facilities, and seven are considered as excess to IOC’s needs. The primary distinction between the
Army Reserve Plants and the inactive standby facilities is that Reserve Plants retain most
production equipment while standby plants, typically, do not. If needed, standby plants retain the
ability to be reconstituted for production with the installation of production equipment. Both
types of these inactive plants have contracts to maintain equipment and facilities, preserve
production capability, and perform caretaker operations. The CAS functions performed at the
seven excess sites are primarily limited to environmental remediation. A review of FAR Part 42
indicates that while some of these functions are readily identifiable as CAS, others lie outside the
scope of CAS. According to official IOC mission and functions documents9
, the inactive AAPs
perform installation management and contract administration over, generally, a contractor
operated installation. Consequently, many of the functions performed by the Government staff are
either directly or indirectly related to the performance of CAS, but also include program
management and installation management functions.
To minimize the ownership costs of these plants, IOC has facility use contracts in place at
some of the inactive plants that allow contractors to obtain DoD and non-DoD production orders,
8
Two of the 14 plants, Longhorn and Louisiana, are administratively combined.
9
The IOC Regulation 10-9, Organization and Functions, Inactive and Excess Army Ammunition Plants, 3 Jul 1997

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competitively, and produce at the plants under third-party contract arrangements. These third
party arrangements are summarized in Table G-2 in Appendix G. Third party contract
arrangements help offset the cost of the Government overhead associated with the maintenance of
the facilities.
Figure 4-2 describes functions and subfunctions performed at the inactive plants by the
AAP Government staff related to FAR Part 42, Contract Administration and Audit Services:
FUNCTION SUBFUNCTIONS RELATED TO FAR 42
Contract administration • Cost and price analysis
• Contract audit
• Review of cost based proposals
• Contract modification
• Negotiation
• Purchasing review
• Statement of Work review
• Labor relations
Equipment management and disposal • Oversight of contractor equipment utilization
• Oversight of equipment planning and disposal
Production oversight and product acceptance • Product acceptance documentation
• Program/process/product audit
Surveillance of stored materials • Monitor storage operations
Transportation and traffic management • Shipment planning and GBL reviews and reports
• Contractor technical assistance
• DOT Law Review
• Demurrage/detention tracking and payment
program
• Demilitarization (field service planning and
reporting)
• Container control
• Contractor traffic office/depot evaluation
• Carrier performance program review
Figure 4-2 Inactive Plants' FAR Part 42 Functions/Subfunctions
4.3.1 Issues, Assumptions, and Constraints
After a series of formal discussions with IOC and DCMC staffs, the following general
assumptions were developed:
• Any actual transfer of function will require a “site-by-site” examination of unique
product and service attributes.
• If required, IOC and DCMC will mutually determine disposition and control over
Quality Assurance Specialist (Ammunition Surveillance) (QASAS) positions. These

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positions are controlled by the U.S. Army Defense Ammunition Center & Schools,
McAlester Army Depot, OK under the IOC10
.
• The CAS activities that both DCMC and IOC agreed were purely CAS and were
delegable are: contract administration, equipment management, production oversight,
traffic management, facility management, and quality assurance. Of these activities,
equipment management and quality assurance had to remain on-site even if CAS were
transferred to DCMC.
Major issues and concerns expressed by IOC and AAP staffs regarding the delegation of
CAS to the DCMC include:
• Responsiveness/proximity of CAS staff to the AAPs
• Maintenance of effective command and control (C2) and communications
• Retention of authority to perform limited negotiation. The IOC determined that it
desires to retain all authority for pre-formal negotiation authority in the event of
transfer of CAS to DCMC.
• Allocation, training, and career management of QASAS personnel
• Potentially increased IOC staffing/funding requirements upon delegation of CAS to
DCMC
• Many of the inactive plants employ very few CAS personnel. Of these personnel, many
are “multi-hatted.” As such, if their CAS duties were delegated, someone would still
have to fill a non-CAS role, resulting in potential increased staff.
Discussions with DCMC reveal the following information in light of the IOC/AAP’s
concerns:
• The DCMC is willing to assume delegated CAS functions based on an "As is/Where
is" condition in terms of maintaining continuity of operations. This, however, may
include the requirement to service the AAPs via mobile teams if needed.
• The full understanding that IOC reserves the right and will maintain the authority to
direct DCMC CAS actions through formal Memoranda of Instruction. This partially
addresses the IOC/AAP concern regarding maintenance of effective command and
control (C2) and communications
• That any pre-formal (or informal) negotiation authority will remain the domain of the
AAP’s commanders or commanders’ representatives
• The DCMC will attempt to maintain QASAS positions’ continuous onsite AAP
presence and comply with Army Career Program (CP)-20, Quality Assurance
Specialist (Ammunition Surveillance) requirements
• The DCMC is sensitive to the Army’s position that any delegation of CAS to DCMC
should not increase the Army’s staffing/funding requirements
4.3.2 Quantitative Comparison
The Booz·Allen team conducted a cost comparison of four alternatives, which present a
range of outcomes, for the seven active and five inactive plants with a continuing future mission.
The cost estimates cover a 10-year investment and operations period. These four alternatives are:
10
The U.S. Army Defense Ammunition Center & Schools (USADACS) is the Army’s Career Program manager for QASAS.

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• Alternative A-SQ (Status Quo)--The CAS functions and personnel remain the
responsibility of the AAPs.
• Alternative A-1A--All CAS functions and personnel transfer to DCMC with personnel
remaining at the AAPs.
• Alternative A-1B--All CAS functions and personnel transfer to DCMC with all CAS
personnel who can work remotely moving to DCMC Contract Administration Offices
(CAO).
• Alternative A-2--Partial CAS functions and personnel transfer to DCMC CAOs with
partial CAS functions and personnel retained by the AAPs.
The team collected all necessary cost data to verify co-equal treatment and comparison of
the four alternatives. The comparison considered the following cost categories:
• Investment Costs
• Training
• Systems Interface Design
• Operations and Support Costs
• Recurring Training
• DCMC Personnel (Additional for Active Plants)
• DCMC Personnel (Additional for Inactive Plants)
• AAP CAS Personnel (Active Plants)
• AAP CAS Personnel (Inactive Plants)
The Basis of Estimate for these costs, the complete cost summary for each alternative and
the monte carlo simulation are provided in Appendix H.
4.3.2.1 Alternative A-SQ– Costs
Alternative A-SQ captures the costs associated with continuing the existing operations. As
such, the only cost elements under this alternative are the AAP CAS Personnel (Active) and AAP
CAS Personnel (Inactive). Figures 4-3 and 4-4 identify the CAS FTEs by facility included in this
analysis.
Active Plant
Status Quo:
CAS AAP
FTEs at AAP
Lone Star 8.0
Radford 15.8
Holston 9.0
Milan 13.7
Iowa 16.0
Lake City 14.0
Hawthorne 5.0
Total 81.4*
Figure 4-3 Status Quo: Total CAS Full-Time Equivalent (FTE) – Active Plants
*
Indicates number has been rounded

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Inactive
Plant
Status Quo:
CAS AAP
FTEs at AAP
Kansas 1.3
Longhorn/
Louisiana 1.2
Mississippi 0.0
Riverbank 0.0
Scranton 2.4
Total 4.9
Figure 4-4 Status Quo: Total CAS FTEs – Inactive Plants
The active plant CAS personnel costs are approximately $6.2 million per year and the
inactive plant CAS personnel costs are approximately $375,000 per year. For comparative
purposes, the 10-year discounted cost for this alternative equals $54.3 million.
4.3.2.2 Alternative A-1A Costs
In Alternative A-1A, the CAS personnel "switch hats" and become DCMC employees.
Unlike the status quo, there are investment costs with this alternative. We captured both interface
costs to connect existing AAP CAS information systems with DCMC's systems and training costs
to address any initial training for the former AAP employees to become cognizant of DCMC
policies and procedures.
Compared with the Status Quo, recurring costs are also captured in different categories.
Originally, these costs were in the AAP CAS Personnel category, but now they are in the DCMC
CAS Personnel category as shown in Figures 4-5 and 4-6. The number of staff increases slightly
to round up to full positions, so costs increase slightly compared to the status quo. A higher
DCMC burden rate11
contributes to higher costs as well.
Active
Plant
Alt A-1A
New DCMC
FTEs at AAP
Lone Star 8.0
Radford 16.0
Holston 9.0
Milan 14.0
Iowa 16.0
Lake City 14.0
Hawthorne 5.0
Total 82.0
Figure 4-5 Alt A-1A: Distribution of Total CAS FTEs – Active Plants
11
The burden rate considers administrative overhead, personnel fringe benefits, etc.

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Inactive
Plant
Alt A-1A
New DCMC
FTEs at AAP
Kansas 2.0
Longhorn/
Louisiana 2.0
Mississippi 0.0
Riverbank 0.0
Scranton 3.0
Total 7.0
Figure 4-6 Alt A-1A: Distribution of Total CAS FTEs – Inactive Plants
The active plant DCMC Personnel costs are $6.7 million per year and the inactive plant
DCMC Personnel costs are $576,000 per year. For comparative purposes, the 10-year discounted
cost for this alternative equals $61.4 million.
4.3.2.3 Alternative A-1B Costs
In Alternative A-1B, the CAS personnel not only “switch hats” and become DCMC
employees, but also relocate to a DCMC CAO. Like Alternative A-1A, there are investment costs
in this alternative. We captured both interface costs to connect existing CAS information systems
and training costs to address any initial training for the former AAP employees. The recurring
costs are captured in the same categories as Alternative A-1A; all positions are captured in the
DCMC CAS Personnel Category. The number of staff distributed in different geographic
locations is based on whether their activities can be relocated.
As shown in Figure 4-7, 47 new DCMC FTEs remained at the active AAPs. However, 37
FTEs could physically relocate to a CAO. Like Alternative A-1A, the number of DCMC staff that
physically remain at the AAPs was “rounded up” to whole numbers. However, the DCMC FTEs
who relocate to the CAOs do not have to be rounded because they are now co-located and the
sharing of duties with existing DCMC staff is feasible.
If the AAP CAS personnel are relocated to a CAO, DCMC would eventually “draw
down” the AAP unique CAS staffing consistent with past operations at the AAPs. Over time,
AAP-related CAS will be performed by other DCMC staff at the CAO. Based upon discussions
with DCMC, a 10 percent annual reduction in CAS FTEs may be possible after 2001. For risk
analysis purposes, we assumed that 20 percent is the highest reduction rate and 0 percent is the
lowest. Subsequent to these calculations, DCMC advised that a 1 – 5% annual rate of FTE
reduction was more realistic. We did not recalculate the cost of this alternative with this new data
since the result would be an increase in cost of this alternative and would have no impact on our
recommendation.
The rationale behind the assumption of reduced staffing is to capture economies of scale
associated with the phase-out of AAP unique CAS FTEs at CAOs. Since consolidation with
DCMC should allow some professional efficiency (e.g., centralized training, centralized processes,
etc.), we believe that some of these 37 FTEs could be absorbed into existing operations. The
Qualitative Section addresses any expected impacts on quality.

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Active
Plant
Alt A-1B
New DCMC
FTEs at AAP
Alt A-1B:
New DCMC
FTEs at
CAO
Lone Star 4.0 4.0
Radford 10.0 6.0
Holston 3.0 6.5
Milan 10.0 4.6
Iowa 9.0 7.0
Lake City 11.0 4.0
Hawthorne 0.0 5.0
Total 47.0
Total Alt A-1B
37.0*
FTES: 84.0
Figure 4-7 Alt A-1B: Distribution of CAS FTEs – Active Plants
Like the active plants, some of the inactive AAP CAS personnel become DCMC personnel
and physically relocate to DCMC CAOs. We first isolated the CAS personnel into two categories:
DCMC personnel that would relocate, and personnel that would not. We reviewed each plant on
a case-by-case basis and determined that slightly more than 50 percent (4.3 FTEs) could relocate
to a DCMC CAO. The other staff would remain at the AAP. According to the IOC and staff at
the inactive plants, only the equipment management function must stay at the plant.
As shown in Figure 4-8, 4.0 new DCMC FTEs had to stay at the AAPs. However, 4.3
FTEs could physically relocate to a CAO. Like Alternative A-1A, the number of DCMC staff that
physically remain at the AAPs was “rounded up” to whole numbers. However, the DCMC staff
that relocate to the CAOs do not have to be rounded because they are now co-located and the
sharing of duties with other DCMC staff is feasible.
Like the active plants, a 10 percent annual reduction in CAS FTEs may be possible after
2001. For risk analysis purposes, we assumed that 20 percent is the highest reduction rate and 0
percent is the lowest. Again, subsequent to these calculations, DCMC advised that a 1 – 5%
annual FTE reduction was more realistic. We did not recalculate this alternative as the outcome
would not change our recommendation.
Inactive
Plant
Alt A-1B
New DCMC
FTEs at AAP
Alt A-1B:
New DCMC
FTEs at
CAO
Kansas 1.0 1.1
Longhorn/
Louisiana 2.0 0.9
Mississippi 0.0 0.0
Riverbank 0.0 0.0
Scranton 1.0 2.2
Total 4.0
Total Alt A-1B
4.3*
FTEs: 8.3
*

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Figure 4-8 Alt A-1B: Distribution of CAS FTEs – Inactive Plants
4.3.2.4 Alternative A-2 Costs
Alternative A-2, similarly segregates CAS positions into those which must remain at the
AAP and those which can be remote. However, this alternative assumes that those CAS functions
which must remain at the plant would continue to be filled by AAP employees.
Some of the active plant AAP CAS personnel become DCMC personnel and physically
relocate, so we first isolated the CAS personnel into two categories: Those that had to remain at
the plant, and those that did not. Most of these staff (except for two) were completely assigned
(100%) to a unique CAS function. As such, they were easily separated into staff who could
relocate to a CAO and those who had to remain at the AAP. According to the IOC and the staff
at the active plants, the equipment management function and the QA function must stay at the
plant.
As in Figure 4-9, 45 CAS FTEs remained Army employees and stayed at the AAPs.
However, 37 FTEs could physically relocate to a CAO. Like the Status Quo, the Army staff who
stay at the AAPs could easily continue to allocate their time across CAS and non-CAS functions,
so the numbers of staff do not need to be rounded to whole numbers. Similarly, the DCMC staff
who relocate to the CAOs do not have to be rounded because they are co-located with other
DCMC staff and the sharing of their duties is feasible.
If the CAS FTEs are relocated to a CAO, DCMC would eventually “draw down” the AAP
unique CAS staffing consistent with past operations at AAPs. Over time, related CAS functions
will be performed by other DCMC staff at the CAOs. Based on discussions with DCMC, a 10
percent annual reduction in CAS FTEs may be possible after 2001. For risk analysis purposes, we
assumed that 20 percent is the highest reduction rate and 0 percent is the lowest. For 2000-2001,
no change will occur for the number of new CAS DCMC FTEs (37).
The rationale behind this assumption to reduce is to capture economies of scale associated
with the phase-out of AAP unique CAS FTEs at CAOs. Since consolidation with DCMC should
allow some professional efficiency (e.g., centralized training, centralized processes, etc.), we
believe that some of these 37 FTEs could be absorbed into existing operations. See the Qualitative
Section for expected impacts on quality. We did not recalculate the cost of this alternative with
DCMC's subsequently recommended 1 – 5% annual FTE reduction. The effect of that change
would be to make this alternative less attractive and would not change our recommendation.

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Active
Plant
Alt A-2:
AAP
FTEs at
AAP
Alt A-2:
New DCMC
FTEs at
CAO
Lone Star 4.0 4.0
Radford 10.0 6.0
Holston 2.5 6.5
Milan 9.4 4.6
Iowa 9.0 7.0
Lake City 10.0 4.0
Hawthorne 0.0 5.0
Total 45*
37*
Total Alt A-2 FTEs:82
Figure 4-9 Alternative A-2: Distribution of CAS FTEs – Active Plants
Like the active plants, some of the inactive plant AAP CAS personnel become DCMC
personnel and physically relocate to CAOs, so we first isolated the CAS personnel into two
categories: Positions that could relocate and those that could not. We reviewed each plant on a
case-by-case basis and determined that slightly less than 50 percent (4.3 FTEs) could relocate to a
CAO. The remaining FTEs would stay at the AAPs. According to the IOC and the inactive plants’
staff, only the equipment management function must stay at the plant.
As shown in Figure 4-10, 4.0 FTE remain with the Army while 4.3 FTE could physically
relocate to a CAO. Like the Status Quo, the Army staff who stay at the AAPs could easily
continue to allocate their time across CAS and non-CAS functions, so the staff in those positions
do not need to be rounded to whole numbers. Similarly, the DCMC staff who relocate to the
CAOs do not have to be rounded because they are co-located and the sharing of duties is feasible.
Like the active plants, a 10 percent annual reduction in CAS FTEs may be possible after
2001. For risk analysis purposes, we assumed that 20 percent is the highest reduction rate and 0
percent is the lowest. For 2000-2001, no change will occur for the number of new CAS DCMC
FTEs (4.3).
Inactive
Plant
Alt A-2:
AAP
FTEs at AAP
Alt A-2:
New DCMC
FTEs at
CAO
Kansas 0.9 1.1
Longhorn/
Louisiana 1.1 0.9
Mississippi 0.0 0.0
Riverbank 0.0 0.0
Scranton 0.8 2.2
Total 2.8
Total Alt A-2
4.3
FTEs: 7.0
Figure 4-10 Alternative A-2: Distribution CAS FTEs-- Inactive Plants
*

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Figure 4-11 summarizes the total costs for the four alternatives over a 10-year period.
EXPECTATION STATUS QUO ALT A-1A ALT A-1B ALT A-2
Low $48.7 $54.6 $47.0 $43.0
Most Likely $54.3 $61.4 $56.5 $51.7
High $65.4 $70.2 $70.1 $66.0
Figure 4-11 The AAP Cost Comparison (10-Year Investment and Operations in Millions)
A graphic comparison of the four alternatives’ 10 year investment and operations cost
shows:
AAP Cost Comparison (10 Years Investment and
Operations)
65.4
70.2 70.1
66
54.3
61.4
56.5
51.7
48.7
54.6
47
43
0
10
20
30
40
50
60
70
80
A-SQ A-1A A-1B A-2
Alternative
DiscountedM$
High
Most Likely
Low
Figure 4-12 AAP Cost Comparison (10-Year Investment and Operations)
4.3.3 Qualitative Comparison
The Booz·Allen team developed a set of qualitative factors to evaluate the alternative
scenarios of CAS performance. Section 1.4.3.5, above, describes these factors, the methodology
used to incorporate these factors into the decision making process, and the application of the
methodology to this study. The relative preference of any of the alternative scenarios was
determined by evaluating how well that alternative satisfied each of the qualitative factors. This
section describes the results of the qualitative comparison for the proposed CAS AAP
alternatives. The evaluation criteria and their weights are:

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RANK EVALUATION CRITERIA WEIGHT
1 Achievement of mission objectives / impact on military readiness 22%
2 Subject Matter Expertise of CAS Staff 18%
3 Timeliness 16%
4 Ability to recruit, assign, develop and retain CAS staff 12%
5 Synergy with the Non-CAS functions 10%
6 One Face to industry (Performer) 9%
7 Independence of the CAS function 5%
8 One face to the customer 4%
9 Expedience of adopting/implementing acquisition/CAS reforms 4%
Figure 4-13 Rankings of Qualitative Factors
Figure 4-14 shows the relative ratings of the four AAP alternative scenarios evaluated
against the qualitative factors. The outcomes of these qualitative comparisons are also depicted in
the bar chart below.
ALTERNATIVE A-SQ A-1A A-1B A-2 TOTAL
Relative Score .310 .249 .171 .269 0.999/1.000
Figure 4-14 The AAP Alternatives Qualitative Scores
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
Status Quo A-1A A-1B A-2
Army Ammo
Qualitative Weightings of Alternatives
Figure 4-15 The AAP Alternatives Qualitative Ratings
The results indicate that achievement of the nine qualitative factors would be best achieved
by maintaining the status quo (alternative A-SQ).
4.4 Recommendation
The ten-year costs associated with Alternative A-2 ($51.7 million) and Alternative A-SQ
($54.3 million) are extremely close. Even the ranges of costs provide conflicting results (Status
Quo is better on the "high end" while A-2 is better on the "low end"). Thus, we used the
qualitative analysis to make a decision to determine the superior alternative.

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Ranking the qualitative scores, as described in Section 4.3.3, indicates a preference for
Alternative A-SQ. Therefore Booz·Allen recommends maintaining the status quo, leaving the
CAS responsibility with the Army. There is also a significantly lower cost risk associated with
selecting the status quo as reflected by the smaller range of costs.

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5 DFARS Clause 242.203(a)(i)(B) -- Allowing the Retention of Contract Administration
The purpose of this research and analysis is to examine the "trade-offs" associated with the
elimination of the following Defense Federal Acquisition Regulation Supplement (DFARS)
provision:
242.203 Retention of Contract Administration
(a)(i) DoD activities shall not retain any contract for administration that requires
performance of any contract administration function at or near contractor facilities, except
contracts for:
(B) Research and development with universities
5.1 Background
The DoD IG report, of January 1998, recommended the elimination of DFARS
242.203(a)(i)(B). The Acting Deputy Secretary, as well as representatives of the Navy, Army and
Air Force non-concurred with the recommendation. In their comments, they suggested that a
more thorough review of the methods employed by the Components to conduct administration of
their contracts for research and development (R&D) with universities was required prior to
making a determination about the disposition of the DFARS clause.
If this DFARS clause was eliminated, DoD activities contracting with universities for
research and development would have to delegate any contract administration functions that
needed to be performed at or near the university. These functions would be delegated in
accordance with the Federal Directory of Contract Administration Services Components.
5.1.1 Methodology
The methodology used in this study was designed to examine the possible ramifications of
the elimination of DFARS 242.203 (a)(i)(B). To accomplish this goal, a three-track strategy was
employed.
Track 1. Determine the origin of DFARS 242.203(a)(i)(B). The strategy used to
determine the origin of DFARS 242.203 (a)(i)(B) entailed a thorough search and review of public
information available on the origin and history of that provision. Research included the Internet,
libraries, and the Defense Acquisition Regulations Directorate for a review of the DFARS case
history.
Track 2: Determine the amount of funding impacted by DFARS 242.203 (a)(i)(B). Public
information regarding the amount of funding impacted by this DFARS was identified and
analyzed.
Track 3: Establish an overall understanding of the way R&D contracts with universities
are administered by all DoD components. This approach involved conducting interviews with a
variety of individuals from the university community, Federally Funded Research and
Development Centers (FFRDCs) and University Affiliated Research Centers (UARCs), as well as
representatives of DoD's Components and agencies. FFRDCs and UARCs are further defined in
Appendix I.

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5.1.2 Limitations and Assumptions
5.1.2.1 Limitations
By the language of the DFARS, this study limited its investigation and analysis to the
administration of contracts for research and development with universities by the DoD or its
components.
The number of individuals interviewed for this study was limited by the duration of the
study and the subject's willingness to participate.
Additionally, the quality and amount of information available for review as well as a need
to maintain efficiency limited this study. The availability of public information on the background
and history of the DFARS clause was also limiting. Minimal information was available from the
Defense Acquisition Regulations Directorate on the history of the regulation.
5.1.2.2 Assumptions
The primary assumption of this study was that the opinions and experiences of the
universities, FFRDCs, UARCs and DoD personnel interviewed were representative of their
respective organizations and the university research community at large.
5.2 Findings
5.2.1 The Origins of DFARS 242.203 (a)(i)(B)
No supporting or historical data on the origins or changes over time of this authority to
retain CAS could be found. However, the authority to retain CAS responsibility for R&D
contracts goes back a long way in the Defense procurement regulations. The Armed Services
Procurement Regulations (ASPR), the predecessor of the DFARS, authorizes retention of CAS
for all R&D contracts irrespective of the recipient (APR 20-703.2(iii)) and grants for basic
research at educational institutions and other nonprofit organizations (ASPR 20.03.2(iv))12
.
Today, the DFARS allows retention of CAS for any R&D contract with universities. The DFARS
does not apply to grants and other assistance instruments, which are the majority of DoD R&D
awards to universities.
5.2.2 Magnitude of Funding Impacted by DFARS 242.203 (a)(i)(B)
Several categorizations of educational institutions, including non-profit education, non-
profit organization and small business, are used when reporting data to the Federal Procurement
Data Center. For the purposes of this study, all DoD R&D contract entries between Fiscal Year
(FY) 1995 through the third quarter of 1998 were reviewed. From this list, a subset of contracts
awarded to educational institutions was created. To ensure that all educational institutions were
included in this subset, the list was sorted by reviewing the contractor name as well as contractor
type.
12
Armed Services Procurement Regulations, 1 January 1969.

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As shown in Figure 5-1, the R&D contractual obligations to educational institutions
between FY 1995 and FY 1998 (Q3) was relatively small when compared to the total DoD R&D
expenditures for that period. Universities receive approximately $1 billion in R&D contracts
annually. The majority of funds via contracts are awarded to other organizations such as large for
profit businesses and other non-profit organizations. This data portrays contract obligations
exclusively. It does not reflect funds obligated through assistance vehicles such as grants or
cooperative agreements.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
1995 1996 1997 1998
Other Organizations
Educational
Institutions
Figure 5-1 DoD R&D Contract Obligations FY 95 – FY 98 (Q3) (In Millions)
In FY 1997, the Air Force obligated the majority of the R&D dollars contractually
awarded to universities, as shown in Figure 5-2. This is most likely attributable to the fact that the
Air Force is the "parent" organization of two university sponsored FFRDCs that are recipients of
large obligations, namely MIT’s Lincoln Labs and Carnegie Mellon’s Software Engineering
Institute.
Other
Air
Force
Army
Navy
Figure 5-2 Distribution of FY 1997 DoD Component R&D Contract Obligations with Universities
In 1998, of the top 50 parent companies receiving the largest dollar volume of prime
contract awards, there were only two educational institutions: Johns Hopkins University, ranked
38th
, and MIT, ranked 29th
. Ten universities were included in the top 100 DoD prime RDT&E
contracts over $25,000 awarded in FY 1998 to United States educational and non-profit

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institutions. These ten universities, shown in Figure 5-3, account for approximately $927 million
in obligations, and include the two university sponsored FFRDCs and five of the six UARCs.
Rank University Name Total Contract
Award Dollars
10 Massachusetts Institute of Technology $369,499,000
14 Johns Hopkins University $302,751,000
36 Pennsylvania State University $54,862,000
39 University of Texas System $49,771,000
40 Carnegie Mellon University $49,703,000
75 University of California $23,098,000
78 Georgia Tech Research Corporation $20,690,000
81 University of Southern California $19,292,000
82 Utah State University Inc. $19,185,000
87 The University of Dayton Inc. $17,713,000
Source: DIOR
Figure 5-3 U.S. Educational Institutions included in the Top 100 DoD Prime RDT&E Contracts
Awarded to US Educational Institutions and Non-Profits in FY 1998
In summary, the DFARS provision today relates to and impacts primarily contracts
awarded to the relatively large, university-affiliated laboratories, including the FFRDCs and
UARCs.
5.2.3 How R&D Contracts with Universities are Administered
The following sections summarize the information collected from telephone interviews
conducted with representatives of universities, including FFRDCs and UARCs, Army, Navy, Air
Force, DoD, and ONR.
5.2.3.1 Award Vehicles
It was universally acknowledged by everyone interviewed that it has become increasingly
more common for R&D funds to be awarded to universities through grants and cooperative
agreements. Grants are viewed as the more appropriate vehicle in most cases.
The limited use of contracts for university R&D is exemplified in the breakdown of awards
made by the Air Force Office of Scientific Research (AFOSR). Annually, the AFOSR awards
approximately 1100 to 1200 grants and cooperative agreements and only two to three contracts.
Review of the DoD R&D contracts held by Massachusetts Institute of Technology (MIT) suggest
that the trend toward grants and cooperative agreements is Department-wide. MIT currently has
278 grants and cooperative agreements with a variety of DoD organizations and only 38
contracts. The migration towards the use of grants has also affected the business processes of the
obligating organizations, such as Fort Hauchuca. They received authority to award grants in FY
98 and anticipate issuing more grants than contracts in the future.
Contracts are still in use for the two FFRDCs associated with universities (Lincoln
Laboratories and Software Engineering Institute) and the UARCs. These research centers receive
most of their R&D funding via large task order contracts.

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5.2.3.2 Current Status of Administration of DoD R&D Contracts with
Universities
Given the short duration of this study, it was not possible to get an accurate count of the
number of DoD contracts being retained for administration and the number of contracts whose
administrative function were fully or partially delegated. We also have no reliable data as to why
the issuing organizations retain CAS functions. Currently, this information is not collected. There
is an effort underway by DDR&E to try to capture such information for grants directly, and by
way of comparison to the grants data, for contracts. Therefore, the information presented in this
study, is preliminary and must be considered approximate.
Interviews conducted for this study indicated that ONR's penetration in the administration
of DoD's R&D contracts with universities, other than FFRDCs and UARCs, is quite deep. Of
course, ONR acts as the administrator of all Navy R&D contracts with universities. According to
ONR representatives and confirmed by interviews with Air Force representatives, ONR
administers most of the Air Force R&D contracts with universities. All AFOSR contracts are
administered by ONR. Although ONR representatives indicated that they act as administrator for
a large number of the Army's R&D contracts with universities, this information was not
confirmed. The administration pattern of DoD R&D contracts awarded to MIT, shown in Figure
5-4, also illustrates ONR's dominance:
DoD Contracts Number of
Contracts
Total 38
Administered by ONR 32
Administered by Other 5
Figure 5-4 Administration of DoD Contracts with MIT
The contract administration functions for both university affiliated FFRDCs is retained by
the Air Force's Electronics Systems Center (ESC). Contracts with three of the four Navy
sponsored UARCs are administered by ONR. The fourth Navy sponsored UARC, the Johns
Hopkins University Applied Physics Lab, is administered by DCMC. The distinction is that Johns
Hopkins employs commercial cost principles and therefore delegated administration is assigned to
DCMC. Fort McPherson retains the contract administration for Georgia Tech Research Institute.
5.2.3.3 Drivers in Determining the Disposition of Administrative Functions of
R&D Contracts with Universities
Interviews conducted for this study suggested the following:
• The organizational affiliation of a contract administrator is of less importance than the
individual's understanding of the university environment, cost and business practices,
• The physical location of the contract administrator is generally not a critical factor
• A contract administrator who acts as a single point of contact for all of a university’s
contracts is preferable to multiple contract administrators

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Contract Administrator Affiliation. Although differences were found in the way R&D
contracts with FFRDCs, UARCs, and other universities are administrated, representatives of all
three of these groups indicated that the most important factor determining the success of a
contract administrator is his or her knowledge. Specifically, the administrator must understand the
unique university culture, the needs of university R&D, and university cost principles and other
regulations governing university research with the Federal Government. Specific organizational
affiliation of the contract administrator is of little importance.
Anecdotal accounts of university personnel indicated a great level of frustration when
working with administrators whose experience is exclusively with commercial contracts. In one
instance, an Army installation chose to retain administration of its own R&D contract with one of
the larger universities. Representatives of that university reported investing considerable effort
educating that administrator who was unfamiliar with the treatment of indirect costs, property
issues and standard cost accounting practices of an educational institution.
In the case of FFRDCs and UARCs, there was some support for the notion that when the
administration function is retained by the contracting agency, communications are streamlined and
response times improved. This was particularly true for the larger more complex contracts where
many actions are required on a daily basis. However, even representatives from the FFRDCs
agreed that this issue was not as critical as the knowledge and experience of the individual
administrator.
Physical location of the contract administrator. Each university representative agreed that
it was beneficial to have a contract administrator physically located close to the university or
facility where the work is being conducted. However, the same group of individuals, with the
exception of those from Lincoln Labs and University of Washington Applied Physics Laboratory,
believed that the duties of the administrator could easily and efficiently be conducted from another
site. Generally, the benefits noted for having a contract administrator in close physical proximity
related to the ability to build a working, professional and team-spirited relationship between
university personnel and their DoD counterparts. Representatives from Lincoln Laboratories felt
that having a contract administrator at their site was a necessity rather than a luxury. This was due
to the amount of daily interaction between the contract administrator and laboratory affiliated
personnel, and the need for efficient resolution of all actions.
A single point of contact contract administrator. Regardless of the size of the university or
laboratory, all individuals interviewed noted that the ability to have a single point of contact for all
of their contracts was preferable. This was of particular interest to UARCs that operate under
task order contracts, and may be trying to manage over one hundred tasks simultaneously.
5.3 Conclusions and Recommendations
It is recommended that DFARS 242.203 (a)(i)(B) be eliminated. Overall, the amount of
university R&D performed via contracts is declining. Delegation of CAS should be aimed at
ensuring that university R&D contracts are administered by individuals who have the appropriate
experience and knowledge to effectively and efficiently perform the required duties. This
knowledge and experience is not necessarily resident in one organization, and is not typically
resident in the organizations awarding the contracts. ONR has established a reputation for
administration of grants and contracts with universities, which employ the university cost
principles of OMB Circular A-21. DCMC likewise has the knowledge and experience to

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administer contracts and other agreements with universities that employ for-profit cost principles.
These distinctions in organizational excellence should be reflected in the Federal Directory of
Contract Administration Services Components, maintained by DCMC, which should be the guide
for delegation of CAS for university R&D contracts.
Preliminary indications are that CAS for university R&D contracts can be satisfactorily
performed if delegated to the appropriately experienced administrators. A further more detailed
examination of the CAS requirements and operations of university-affiliated laboratories,
including the UARCS and FFRDCs, is recommended to determine whether those contractual
relationships warrant retention of CAS by the sponsoring organizations, or require on-site
performance of CAS. Again the appropriate performer of CAS for each university should be
identified in the Federal Directory of CAS Components, eliminating the need for the DFARS CAS
retention provision.
It is further suggested that no action be taken on the final recommendation until the
DDR&E has completed its collection of data on the current assignments of CAS for university
R&D contracts. The potential volume of work which may be redirected to any CAS provider;
whether it be ONR, DCMC, or other component; should be known as closely as possible to
ensure that the recipient organization of the CAS delegation is prepared for the volume of work.
Additionally, any unique circumstances at each of the universities needs to be considered prior to
requiring the contract placement office to delegate post-award administration. If the final product
of the DDR&E effort supports the findings of this study, then DoD should proceed with
elimination of this DFARS provision.

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Booz·Allen & Hamilton A-1 May 14. 1999
Appendix A
FAR 42.302 Contract Administration Functions
DFARS 242.302 Contract Administration Functions

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Appendix A
FAR 42.302 Contract Administration Functions
(a) The following contract administration functions are normally delegated to a CAO. The
contracting officer may retain any of these functions, except those in paragraphs (a)(5), (a)(9),
and
(a)(11) of this section, unless the contracting officer has been designated to perform these
functions by the cognizant Federal agency (see 42.001).
(1) Review the contractor's compensation structure.
(2) Review the contractor's insurance plans.
(3) Conduct post-award orientation conferences.
(4) Review and evaluate contractors' proposals under Subpart 15.4 and, when negotiation will be
accomplished by the contracting officer, furnish comments and recommendations to that officer.
(5) Negotiate forward pricing rate agreements (see 15.407-3).
(6) Negotiate advance agreements applicable to treatment of costs under contracts currently
assigned for administration (see 31.109).
(7) Determine the allowability of costs suspended or disapproved as required (see Subpart 42.8),
direct the suspension or disapproval of costs when there is reason to believe they should be
suspended or disapproved, and approve final vouchers.
(8) Issue Notices of Intent to Disallow or not Recognize Costs (see Subpart 42.8).
(9) Establish final indirect cost rates and billing rates for those contractors meeting the criteria for
contracting officer determination in Subpart 42.7.
(10) Attempt to resolve issues in controversy, using ADR procedures when appropriate (see
subpart 33.2); prepare findings of fact and issue decisions under the Disputes clause on matters in
which the administrative contracting officer (ACO) has the authority to take definitive action.
(11) In connection with Cost Accounting Standards (see 48 CFR 30.601 and 48 CFR Chapter 99
(FAR Appendix)).
(i) Determine the adequacy of the contractor's disclosure statements;
(ii) Determine whether disclosure statements are in compliance with Cost Accounting Standards
and Part 31;

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(iii) Determine the contractor's compliance with Cost Accounting Standards and disclosure
statements, if applicable; and
(iv) Negotiate price adjustments and execute supplemental agreements under the Cost Accounting
Standards clauses at 48 CFR 52.230-2, 52.230-3, 52.230-4, 52.230-5, and 52.230-6.
(12) Review and approve or disapprove the contractor's requests for payments under the progress
payments or performance-based payments clauses.
(13) Make payments on assigned contracts when prescribed in agency acquisition regulations.
(14) Manage special bank accounts.
(15) Ensure timely notification by the contractor of any anticipated overrun or underrun of the
estimated cost under cost-reimbursement contracts.
(16) Monitor the contractor's financial condition and advise the contracting officer when it
jeopardizes contract performance.
(17) Analyze quarterly limitation on payments statements and recover overpayments from the
contractor.
(18) Issue tax exemption forms.
(19) Ensure processing and execution of duty-free entry certificates.
(20) For classified contracts, administer those portions of the applicable industrial security
program delegated to the CAO (see Subpart 4.4).
(21) Issue work requests under maintenance, overhaul, and modification contracts.
(22) Negotiate prices and execute supplemental agreements for spare parts and other items
selected through provisioning procedures when prescribed by agency acquisition regulations.
(23) Negotiate and execute contractual documents for settlement of partial and complete contract
terminations for convenience, except as otherwise prescribed by Part 49.
(24) Negotiate and execute contractual documents settling cancellation charges under multi-year
contracts.
(25) Process and execute novation and change of name agreements under Subpart 42.12.
(26) Perform property administration (see Part 45).
(27) Approve contractor acquisition or fabrication of special test equipment under the clause at

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52.245-18, Special Test Equipment.
(28) Perform necessary screening, redistribution, and disposal of contractor inventory.
(29) Issue contract modifications requiring the contractor to provide packing, crating, and
handling services on excess Government property. When the ACO determines it to be in the
Government's interests, the services may be secured from a contractor other than the contractor in
possession of the property.
(30) In facilities contracts.
(i) Evaluate the contractor's requests for facilities and for changes to existing facilities and provide
appropriate recommendations to the contracting officer;
(ii) Ensure required screening of facility items before acquisition by the contractor;
(iii) Approve use of facilities on a noninterference basis in accordance with the clause at 52.245-9,
Use and Charges;
(iv) Ensure payment by the contractor of any rental due; and
(v) Ensure reporting of items no longer needed for Government production.
(31) Perform production support, surveillance, and status reporting, including timely reporting of
potential and actual slippages in contract delivery schedules.
(32) Perform preaward surveys (see Subpart 9.1).
(33) Advise and assist contractors regarding their priorities and allocations responsibilities and
assist contracting offices in processing requests for special assistance and for priority ratings for
privately owned capital equipment.
(34) Monitor contractor industrial labor relations matters under the contract; apprise the
contracting officer and, if designated by the agency, the cognizant labor relations advisor, of
actual or potential labor disputes; and coordinate the removal of urgently required material from
the strike-bound contractor's plant upon instruction from, and authorization of, the contracting
officer.
(35) Perform traffic management services, including issuance and control of Government bills of
lading and other transportation documents.
(36) Review the adequacy of the contractor's traffic operations.
(37) Review and evaluate preservation, packaging, and packing.

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(38) Ensure contractor compliance with contractual quality assurance requirements (see Part 46).
(39) Ensure contractor compliance with contractual safety requirements.
(40) Perform engineering surveillance to assess compliance with contractual terms for schedule,
cost, and technical performance in the areas of design, development, and production.
(41) Evaluate for adequacy and perform surveillance of contractor engineering efforts and
management systems that relate to design, development, production, engineering changes,
subcontractors, tests, management of engineering resources, reliability
and maintainability, data control systems, configuration management, and independent research
and development.
(42) Review and evaluate for technical adequacy the contractor's logistics support, maintenance,
and modification programs.
(43) Report to the contracting office any inadequacies noted in specifications.
(44) Perform engineering analyses of contractor cost proposals.
(45) Review and analyze contractor-proposed engineering and design studies and submit
comments and recommendations to the contracting office, as required.
(46) Review engineering change proposals for proper classification, and when required, for need,
technical adequacy of design, producibility, and impact on quality, reliability, schedule, and cost;
submit comments to the contracting office.
(47) Assist in evaluating and make recommendations for acceptance or rejection of waivers and
deviations.
(48) Evaluate and monitor the contractor's procedures for complying with procedures regarding
restrictive markings on data.
(49) Monitor the contractor's value engineering program.
(50) Review, approve or disapprove, and maintain surveillance of the contractor's purchasing
system (see Part 44).
(51) Consent to the placement of subcontracts.
(52) Review, evaluate, and approve plant or division-wide small, small disadvantaged and women-
owned small business master subcontracting plans.
(53) Obtain the contractor's currently approved company- or division-wide plans for small, small
disadvantaged and women-owned small business subcontracting for its commercial products, or,

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if there is no currently approved plan, assist the contracting officer in evaluating the plans for
those products.
(54) Assist the contracting officer, upon request, in evaluating an offeror's proposed small, small
disadvantaged and women-owned small business subcontracting plans, including documentation
of compliance with similar plans under prior contracts.
(55) By periodic surveillance, ensure the contractor's compliance with small, small disadvantaged
and women-owned small business subcontracting plans and any labor surplus area contractual
requirements; maintain documentation of the contractor's
performance under and compliance with these plans and requirements; and provide advice and
assistance to the firms involved, as appropriate.
(56) Maintain surveillance of flight operations.
(57) Assign and perform supporting contract administration.
(58) Ensure timely submission of required reports.
(59) Issue administrative changes, correcting errors or omissions in typing, contractor address,
facility or activity code, remittance address, computations, which do not require additional
contract funds, and other such changes (see 43.101).
(60) Cause release of shipments from contractor's plants according to the shipping instructions.
When applicable, the order of assigned priority shall be followed; shipments within the same
priority shall be determined by date of the instruction.
(61) Obtain contractor proposals for any contract price adjustments resulting from amended
shipping instructions. Review all amended shipping instructions on a periodic, consolidated basis
to ensure that adjustments are timely made. Except when the ACO has settlement authority, the
ACO shall forward the proposal to the contracting officer for contract modification. The ACO
shall not delay shipments pending completion and formalization of negotiations of revised
shipping instructions.
(62) Negotiate and/or execute supplemental agreements, as required, making changes in
packaging subcontractors or contract shipping points.
(63) Cancel unilateral purchase orders when notified of nonacceptance by the contractor. The
CAO shall notify the contracting officer when the purchase order is canceled.
(64) Negotiated and execute one-time supplemental agreements providing for the extension of
contract delivery schedules up to 90 days on contracts with an assigned Critically Designator of C
(see 42.1105). Notification that the contract delivery schedule is being extended shall be

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provided to the contracting office. Subsequent extensions on any individual contract shall be
authorized only upon concurrence of the contracting office.
(65) Accomplish administrative closeout procedures (see 4.804-5).
(66) Determine that the contractor has a drug-free workplace program and drug free awareness
program (see subpart 23.5).
(67) Support the program, product, and project offices regarding program reviews, program
status, program performance and actual or anticipated program problems.
(68) Evaluate the contractor's environmental practices to determine whether they adversely
impact contract performance or contract cost, and ensure contractor compliance with
environmental requirements specified in the contract. Contracting officer responsibilities include,
but are not limited to.
(i) Ensuring compliance with specifications requiring the use of environmentally preferable and
energy-efficient materials and the use of materials or delivery of end items with the specified
recovered material content. This shall occur as part of the quality
assurance procedures set forth in part 46.
(ii) As required in the contract, ensuring that the contractor complies with the reporting
requirements relating to recovered material content utilized in contract performance.
(69) Administer commercial financing provisions and monitor contractor security to ensure its
continued adequacy to cover outstanding payments, when on-site review is required.
(b) The CAO shall perform the following functions only when and to the extent specifically
authorized by the contracting office:
(1) Negotiate or negotiate and execute supplemental agreements incorporating contractor
proposals resulting from change orders issued under the Changes clause. Before completing
negotiations, coordinate any delivery schedule change with the
contracting office.
(2) Negotiate prices and execute priced exhibits for unpriced orders issued by the contracting
officer under basic ordering agreements.
(3) Negotiate or negotiate and execute supplemental agreements changing contract delivery
schedules.
(4) Negotiate or negotiate and execute supplemental agreements providing for the deobligation of
unexpended dollar balances considered excess to known contract requirements.

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(5) Issue amended shipping instructions and, when necessary, negotiate and execute supplemental
agreements incorporating contractor proposals resulting from these instructions.
(6) Negotiate changes to interim billing prices.
(7) Negotiate and definitize adjustments to contract prices resulting from exercise of an economic
price adjustment clause (see subpart 16.2).
(8) Issue change orders and negotiate and execute resulting supplemental agreements under
contracts for ship construction, conversion, and repair.
(9) Execute supplemental agreements on firm-fixed price supply contracts to reduce required
contract line item quantities and deobligate excess funds when notified by the contractor of an
inconsequential delivery shortage, and it is determined that such
action is in the best interests of the Government, notwithstanding the default provisions of the
contract. Such action will be taken only upon the written request of the contractor and, in no
event shall the total downward contract price adjustment resulting from an inconsequential
delivery shortage exceed $250.00 or 5 percent of the contract price, whichever is less.
(10) Execute supplemental agreements to permit a chance in place of inspection at origin specified
in firm fixed-price supply contracts awarded to nonmanufacturers, as deemed necessary to protect
the Government's interests.
(11) Prepare evaluations of contractor performance in accordance with subpart 42.15.
(c) Any additional contract administration functions not listed in 42.302(a) and (b), or not
otherwise delegated, remain the responsibility of the contracting office.

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DFARS 242.302 Contract Administration Functions
(a)(4) Also, review and evaluate-
(A) Contractor estimating systems (see FAR 15.407-5); and
(B) Contractor material management and accounting systems under Subpart 242.72.
(7) See 242.7503 for ACO responsibilities with regard to receipt of an audit report identifying
significant accounting system or related internal control deficiencies.
(8) Monitor contractor costs under Subpart 242.70.
(9) For additional contract administration functions related to IR&D/B&P projects performed by
major contractors, see 242.771-3(a).
(19) Also negotiate and issue contract modifications reducing contract prices in connection with
the provisions of paragraph (b) of the clause at FAR 52.225-10, Duty-Free Entry.
(33) Also perform industrial readiness and mobilization production planning field surveys and
negotiate schedules.
(39) See 223.370 for safety requirements on contracts for ammunition and explosives.
(41) The Defense Contract Management Command (DCMC) has responsibility for reviewing
earned value management system (EVMS) plans and verifying initial and continuing contractor
compliance with DoD EVMS criteria.
(67) Also support program offices and buying activities in precontractual efforts leading to a
solicitation or award.
(S-70) Serve as the single point of contact for all Single Process Initiative (SPI) Management
Council activities. The ACO shall negotiate and execute facilitywide class modifications and
agreements for SPI processes, when authorized by the affected components.
(b)(S-70) Issue, negotiate and execute orders under basic ordering agreements for overhaul,
maintenance and repair.

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Booz·Allen & Hamilton B-1 May 14, 1999
APPENDIX B
Sources of Information

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The following sources were contacted and interviewed for data pursuant to the
subject matter and organizations within the scope of this study. Interviews were conducted
either telephonically or in person. Those sites visited for tours and in-depth discussion are
annotated with an asterisk (*)
I Interview Sources
Carnegie Mellon Software Engineering Institute
Office of Contracts Administration
Council on Government Relations
Office of the President
Defense Advanced Research Programs Administration
Director of Policy
Defense Contract Audit Agency
Director of the Office of Policy and Plans
Defense Contract Management Command
Contract Business Operations Team
Business Office Team
Customer Support Team
Paperless Contracting Office
Department of the Air Force
Air Force Office of Scientific Research, Office of Contract Administration
Wright Patterson Air Force Base, Office of Contracts Administration
Hanscomb Air Force Base, Office of Contracts Administration
Department of the Army
Industrial Operations Command
• Office of Operations and Management Team
• GOCO Contracting Team
*Lake City Army Ammunitions Plant, Plant Commander and Staff
*Sunflower Army Ammunitions Plant, Commander's Representative
Kansas City Army Ammunitions Plant, Commander's Representative
Fort Hauchuca, Office of Contracts Administration

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Department of the Navy
Naval Sea Systems Command, Supervisor of Shipbuilding, Conversion and Repair
Management Office
*Supervisor of Shipbuilding, Conversion and Repair, Newport News, Supervisor and
Operations and Management Staff
*Supervisor of Shipbuilding, Conversion and Repair, Portsmouth, Deputy Supervisor and
Contracts Manager
*Supervisor of Shipbuilding, Conversion and Repair, San Diego Deputy Supervisor and
Operations and Maintenance Staff
Office of Naval Research
• Director of Acquisition
Ø Executive Director for Acquisition Management
Ø Office of Acquisition Computing Environment
Ø Office of Contracting Activity and Policy
Ø Office of University Business Affairs
v Operations Branch, Engineering Services
Ø Director for the Boston Regional Office
Ø Director for the Seattle Regional Office
Ø Director for the Chicago, IL Regional Office
Ø Property Specialist for the Seattle Regional Office
• Program Manager for Information Electronics and Surveillance
• Program Manager for Ocean, Atmosphere and Space
• Program Manager for Engineering, Materials, and Physical Science
Office of the Director of Defense Research and Engineering
Office of the Director of Research, Director and Staff
Office of Management and Budget
OMB Policy Analyst
Universities
Massachusetts Institute of Technology, Grants Administration Office
Stanford University, Contract and Grants Administration Office
University of Alabama, Office of Sponsored Projects
Johns Hopkins University, Office of Business Operations
University of Texas, Applied Research Lab, Office of Contracts and Purchasing
Lincoln Laboratories, MIT, Office of Contracts Administration
Georgia Tech University, Office of Contracts and Grants Administration
University of Southern California Office of Contracts

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Georgia Tech Research Institute, Fort McPherson, Office of the Chief for Information
Technology
University of California, Berkley, Director for the Office of Research
University of Washington, Applied Physics Laboratory, Office of the Assistant Director

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II References
Procurement Regulations
• Federal Acquisition Regulation
• Defense Federal Acquisition Regulation Supplement
• Armed Services Procurement Regulation
Cost Principles
• Cost Principles for Universities, Office of Management and Budget Circular A-
21
• Cost Principles for Non-Profit Organizations, Office of Management and
Budget Circular A-122
• Inflation Factors, Office of Management and Budget Circular A-94
Previous Studies
• Consolidation of DoD Contract Administration Services, Report No. 98-604,
January 15, 1998
• 1990 AAP Study to Determine Exclusion of Army Ammunition Plants (AAPs
from Consolidation with DCMC
• 1990 SUPSHIP Study to Determine Exclusion of SUPSHIP from
Consolidation with DCMC
• 1993 SUPSHIP Study to Streamline Contract Administration to One
Organization
DCMC
• Defense Management Review Decision 916 of 1989 (established DCMC)
• DCMC Metrics Guidebook, Fifth Edition, 1999
• DCMC brief – "DCMC Paperless Contracting Center Overview"
SUPSHIP
• SUPSHIP Operations Manual (SOM), June 1994
• Navy Acquisition Procedures Supplement NAPS 52.42
• Naval Sea Systems Command Contracting Handbook NCH 42.2
• Ship Acquisition Contract Administration Manual (SACAM)
• Ship Repair Contracting Manual (SRCM)
• SUPSHIP San Diego New Construction and Repair Project Team CAS/Non-
CAS Time Allocation FY 1998
• SUPSHIP San Diego Functions for New Construction and Repair (Civilian and
Military)
• SUPSHIP San Diego New Construction Definition of Cross Team Functional
Skills
• SUPSHIP Newport News CAS/Non-CAS Project Team Time Allocations
• SUPSHIP Summary Workyears and Time Percentages for New Construction
and Repair (FY 1997) (For all SUPSHIPs)

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• Historical Database – Private Sector CNO Schedule Availability Completions
• FY 1998 SUPSHIP Progress Payments
ONR
• Department of Defense Grant and Agreement Regulations DOD 3210.6R
• Using Procurement Contracts and Grants and Cooperative Agreements, 31
USC Chapter 63
• Memo to the Assistant Secretary of Defense for Installation and Logistics, 31
July 1966
• SECNAV Notice subject: Office of Naval Research dated 4 December 1992
• ONR Briefing – "ONR Migration to a Paperless Office by Year 2000"
• Midterm Report of Results of the "Expanded Authorities Portion of the
Federal Demonstration Project: Cutting the Red Tape on Research and
Increasing Scientific Productivity"
• ONR Reorganization Budget Summary dated 21 October 1992
• ONR FY 1999 Salary and Benefit Data
• ONR Metrics of Contract Administration Activity Workload
• ONR University Business Affairs Key Workload Measures dated 24 December
1998
• ONR Contract Administration Overhead Data FY 1999
• ONR FY 99Apportioned Budget
• ONR Instruction 5430.16, Office of Naval Research Mission Statement dated
23 September 1998
• Final Department of Defense 6.1 Electronic Data Interchange/Electronic Funds
Transfer (EDI/EFT) Engineering Study, dated 14 February 1998
• Memorandum from the Undersecretary of Defense (Acquisition and
Technology), Electronic Data Interchange/Electronic Funds Transfer
• Report of the 1991 Code 14 Business Management Review dated 19
December 1991 (Details of the ONR Regionalization)
• National Science Foundation data regarding dollar value of grants administered
by DOD
Army Ammunition Plant
• IOC Regulation 10-8, Organization and Functions, Active Army Ammunition
Plants, 20 June 1997
• IOC Regulation 10-9, Organization and Functions, Inactive and Excess Army
Ammunition Plants, 3 July 1997
• Memorandum for Under Secretary of Defense (Acquisition and Technology),
subject Reform of Ammunition Procurement dated 30 June 1998
• Memorandum for Commander, Headquarters, Industrial Operations Command,
subject, Workload Based Manpower Requirements Program (WBMRP) Study
Final Report – Active and Inactive Ammunitions Plants dated 14 January 1997

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Booz·Allen & Hamilton C-1 May 14, 1999
APPENDIX C
Overhead Rate Calculations

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D-1 Overhead/Burden Rates
Labor rates were calculated using an average salary for CAS staff within each
organization, combined with a burden factor. To account for the total cost of personnel to
an organization, i.e. costs in addition to salary, a burden factor was calculated for each
organization, which was then applied to the average salary. The burden factor reflects
costs associated with information technology, facilities rent and maintenance, utilities,
training, printing/reproduction, travel, supplies, and administrative support. Non-wage
personnel costs such as vacation, sick leave, health insurance, and thrift saving are also
included, consistently across all the organizations studied.
1.1 ONR
The following approach was used to calculate an overhead rate for ONR.
1. Calculate the average unburdened salary. The unburdened salary was
calculated by dividing the number of CAS personnel (81) into the total for the
unburdened CAS salaries ($4,108K). This is equal to $51K.
2. Calculate the average burdened CAS salary. The fully loaded CAS ONR salary
was calculated by adding the total unburdened CAS salaries ($4,108K), with
the total salary fringe (vacation, sick leave, thrift savings etc) ($998K), and the
total overhead costs provided by ONR, allocated to CAS which include travel,
facilities rent and maintenance, communications, utilities, information systems
operation and maintenance ($1,781K). The total burdened salary for ONR is
$6,887K. This figure was divided by the number of CAS employees (81) to
calculate their fully burdened salary ($85K).
3. Calculate ONR's overhead or burden rate. To calculate ONR's overhead rate,
the burdened CAS salary of $85K was divided by the unburdened salary of
$51K. The burden rate for ONR is 1.67.
1.2 SUPSHIP
The following approach was used to calculate an overhead rate for SUPSHIP.
1. Calculate the average unburdened salary. We calculated an average
unburdened CAS salary based on a GS 9 salary ($31K) and the GS 12 salary
($50K) which equaled $41K.
2. Calculate the burdened salary. The burdened salary was calculated using FY
1998 historical information regarding total CAS personnel budget and number
of FTEs performing the CAS function. The budget ($150M) was divided by
the 2251 FTEs to equal the burdened salary of $66K.
3. Calculate SUPSHIP's burden rate. The burden rate was calculated by dividing
the burdened salary of $66K by the average unburdened salary of $41K. The
burden rate for SUPSHIP is 1.65.

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1.3 AAP
The following approach was used to calculate an overhead rate for AAP
1. Calculate the average unburdened salary. The unburdened salary was
calculated using the average active/inactive plant salaries, which were between
$40K and $52K. The average salary for AAP is $46K.
2. Calculate the average burdened salary. The fully loaded AAP salary was
calculated by adding the total unburdened salaries ($12,461K), with the total
salary fringe (vacation, sick leave, thrift savings etc) of $3,426K, and the total
AAP overhead costs (travel, facilities rent and maintenance, communications,
utilities, information systems operation and maintenance) of $4,925K. The total
burdened salary for AAP is $20,813K. This figure was divided by the number
of employees (272) to calculate the average AAP burdened salary of $76.52K.
3. Calculate AAP's burden rate. To calculate AAP's overhead rate, the burdened
salary of $76K was divided by the unburdened salary of $46K. The burden
rate for AAP is 1.67.
1.4 DCMC
The following approach was used to calculate an overhead rate for DCMC.
1. Calculate the average unburdened salary. To calculate DCMC's unburdened
rate we used the average annual salary of $64,644, and divided it by 2080, the
number of hours in a work year. The unburdened hourly rate is equal to
$31.08.
2. Calculate the average burdened salary. DCMC provided us with the established
hourly rate they charge Government agencies for their services, $56.07.
Government agencies for their services. It was concurred through discussions
that this reflected DCMC's fully burdened rate.
3. Calculate DCMC's burden rate. The burden rate was calculated by dividing the
burdened hourly rate of $56.07 by the unburdened hourly rate of $31.08. The
burden rate for DCMC is ~ 1.8.

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Booz·Allen & Hamilton D-1 May 14, 1999
APPENDIX D
SUPSHIP WORKLOAD ANALYSIS

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D SUPSHIP WORKLOAD ANALYSIS FOR THE DELEGATED CAS –
QUALITATIVELY EQUIVALENT SERVICE
This analysis is the Navy's assessment of the staffing changes that would be
required to transfer to DCMC the CAS functions now performed by SUPSHIP and still
provide a level of service and responsiveness that comes close to that which is
provided in today’s integrated SUPSHIP organization. The SUPSHIP repair
operations are analyzed separately from the new construction operations, as described
below.
1.1 Ship Repair
For this analysis, SUPSHIP San Diego was used as a representative organization.
Figure D-1 shows a representative SUPSHIP San Diego Project Team that would execute
a nine-week ship repair availability. It shows the division of time spent on CAS and non-
CAS functions for each individual assigned to the team.
# of Personnel Position CAS % Non-CAS %
1 Ship Superintendent 0 100
1 Admin. Contract
Officer
30 70
1 Program Manager 10 90
4 SBS Trade Specific 30 (120 total) 70
1 Quality Assurance 80 20
1 Material 5 95
1 Finance 10 90
1 Safety/Environment 60 40
1 Barge Representative 10 90
1 Design 10 90
13 TOTAL
Figure D-1 SUPSHIP San Diego Ship Repair Project Team Annual Workload Division Model
Using the division of work for each Ship Repair Project Team member shown
above, the annual CAS workload associated with the Project Team billets is 3.35 work
years. A total of four billets would be transferred to DCMC to perform the CAS workload
of 3.35 work years. Given the error range in estimating the volume of CAS, the need to
transfer whole billets and the predicted loss of organizational integration and synergy from
separating the CAS and non-CAS functions, it can be expected that this 3.35 work year
workload will require four DCMC billets to accomplish. The ratio of billets to workload is
4/3.35, or 1.194.
Figure D-2 shows the application of this rationale across the repair workload at all
SUPSHIP offices. The data in the “Repair CAS Work Years” column represents summary
FY 1997 SUPSHIP workload data provided by the NAVSEA SUPSHIP Management
Office. The result shows a requirement for 484 DCMC billets to accomplish the entire
SUPSHIP repair CAS workload.

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Repair CAS
Work Years
Repair CAS
DCMC Billets
Bath 0.6 1
Groton 0.9 1
Jacksonville 56.8 68
New Orleans 20.7 25
Newport News 31.6 38
Pascagoula 15.9 19
Portsmouth 120.5 144
Puget Sound 25.9 31
San Diego 130 156
Total 402.9*
484*
Figure D-2 Repair CAS Billets
Following the above discussion, if the typical Repair Project Team performs 3.35
work years of CAS, then the remaining 9.65 work years are non-CAS workload.
According to SUPSHIP analysis, this workload would require 11 billets, again due to the
loss of flexibility, unique trade and skill requirements, and loss of inherent synergy in the
original integrated organization.
Another way to demonstrate this is that the non-CAS workload of two of the four
billets transferred could be absorbed within the remaining Project Team members, while
the other two billets could not. The result, within SUPSHIP, is an increase of two billets
for non-CAS to accommodate the transfer of four billets to DCMC. The ratio of billets to
workload is 11/9.65, or 1.14.
The Figure D-3 shows the application of this rationale across the repair non-CAS
workload at all SUPSHIP offices. The data in the “Repair Non-CAS Work Years” column
comes from summary 1997 SUPSHIP workload data provided by the NAVSEA
SUPSHIP Management Office. The results show a requirement for 1260 SUPSHIP billets
to accomplish the repair non-CAS workload.
Repair Non-CAS
Work Years
Repair Non-CAS
SUPSHIP Billets
Bath 44.8 51
Groton 14.37 17
New Orleans 34.18 39
*
Indicates number has been rounded

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Repair Non-CAS
Work Years
Repair Non-CAS
SUPSHIP Billets
Pascagoula 75.3 86
Puget Sound 75.7 87
San Diego 327.55 374
Total 1,102.6*
1,260*
Figure D-3 Repair Non-CAS Billets
1.2 New Construction
A similar analysis was conducted to quantify the staffing changes for the new
construction workload. This analysis used the SUPSHIP San Diego New Construction
Project Team organization, comprised of 44 personnel, and the associated workload split
estimate. Due to the larger size of the new construction team and the fact that the
CAS/non-CAS split between members of the team is more distinct, the number of
additional billets required to accomplish the workload in the alternative scenario is not as
large as the repair case. The ratio of billets to workload for CAS is 1.037, and the ratio for
non-CAS is 1.01. This results in 426 billets required to accomplish the CAS workload at
DCMC, and 764 billets required at SUPSHIP to accomplish the non-CAS workload. The
overall effect on the number of billets when SUPSHIP CAS is delegated to DCMC is
shown in Figure D-4.
New Construction Repair
SUPSHIP DCMC TOTAL SUPSHIP DCMC TOTAL Grand
Total
Status Quo 1,159 0 1,159 1,505 0 1,505 2,664
Alternative 764 426 1,190 1,260 484 1,744 2,934
Figure D-4 Number of Required Billets Overall
*

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Booz·Allen & Hamilton E-1 May 14, 1999
Appendix E: SUPSHIP Detailed Cost Estimate
and Basis of Cost Estimate

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SUPSHIP Status Quo Cost Summary (K$)
(SUPSHIP retains CAS functions)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
1.2 System Interface Design $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Constant) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Inflated) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Discounted) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.1 Recurring Training $0
2.2 Personnel
2.2a DCMC Personnel (Addt'l for New Const.) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2b DCMC Personnel (Addt'l for Repair) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2c SUPSHIP Non-CAS Personnel (Addt'l for
New Const.)
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2d SUPSHIP Non-CAS Personnel (Addt'l for
Repair)
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2e SUPSHIP CAS Personnel (New Const.) $270,879 $27,088 $27,088 $27,088 $27,088 $27,088 $27,088 $27,088 $27,088 $27,088 $27,088
2.2f SUPSHIP CAS Personnel (Repair) $268,480 $26,848 $26,848 $26,848 $26,848 $26,848 $26,848 $26,848 $26,848 $26,848 $26,848
Total O&S Costs (Constant) $539,360 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936
Total O&S Costs (Inflated) $612,520 $55,177 $56,446 $57,744 $59,072 $60,431 $61,820 $63,242 $64,697 $66,185 $67,707
Total O&S Costs (Discounted) $446,312 $52,062 $50,253 $48,506 $46,821 $45,194 $43,623 $42,108 $40,644 $39,232 $37,869
Total Investment and O&S Costs (Constant) $539,360 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936 $53,936
Total Investment and O&S Costs (Inflated) $612,520 $55,177 $56,446 $57,744 $59,072 $60,431 $61,820 $63,242 $64,697 $66,185 $67,707
Total Investment and O&S Costs (Discounted) $446,312 $52,062 $50,253 $48,506 $46,821 $45,194 $43,623 $42,108 $40,644 $39,232 $37,869
Included in Labor Rates in Elements 2.2e & 2.2f

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SUPSHIP Status Quo Risk Summary
Statistics: Value
Trials 1,000
Mean $446,312
Median $446,312
Mode $446,312
Standard Deviation $0
Variance $0
Skewness 0.00
Kurtosis +Infinity
Coefficient of Variability 0.00
Range Minimum $446,312
Range Maximum $446,312
Range Width $0
Mean Standard Error $0.00
Frequency Chart
.000
.250
.500
.750
1.000
0
250
500
750
1000
$446,312 $446,312 $446,312 $446,312 $446,312
1,000 Trials 0 Outliers
Forecast: Alternative S-SQ Discounted Cost

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SUPSHIP Alternative S-1A Cost Summary (K$)
(SUPSHIP CAS functions transfer to DCMC, but personnel physically located at SUPSHIP)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $2,730 $1,365 $1,365 $0 $0 $0 $0 $0 $0 $0 $0
1.2 System Interface Design $1,000 $500 $500 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Constant) $3,730 $1,865 $1,865 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Inflated) $3,860 $1,908 $1,952 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Discounted) $5,338 $1,800 $3,538 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2 Personnel
2.2a DCMC Personnel (Addt'l for New Const.) $301,806 $30,181 $30,181 $30,181 $30,181 $30,181 $30,181 $30,181 $30,181 $30,181 $30,181
2.2b DCMC Personnel (Addt'l for Repair) $303,993 $30,399 $30,399 $30,399 $30,399 $30,399 $30,399 $30,399 $30,399 $30,399 $30,399
New Const.)
$7,997 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800
Repair)
$43,313 $4,331 $4,331 $4,331 $4,331 $4,331 $4,331 $4,331 $4,331 $4,331 $4,331
2.2e SUPSHIP CAS Personnel (New Const.) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2f SUPSHIP CAS Personnel (Repair) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total O&St Costs (Discounted) $543,747 $63,427 $61,223 $59,096 $57,042 $55,060 $53,147 $51,300 $49,518 $47,797 $46,136
Included in Labor Rates in Elements 2.2a & 2.2b

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SUPSHIP Alternative S-1A Risk Summary
Statistics: Value
Trials 1,000
Mean $557,732
Median $556,282
Mode ---
Standard Deviation $20,398
Variance $416,090,752
Skewness 0.25
Kurtosis 2.48
Range Width $100,787
Frequency Chart
Mean = $557,732
.000
.007
.014
.020
.027
0
6.75
13.5
20.25
27
$510,000 $537,500 $565,000 $592,500 $620,000
Forecast: Alternative S-1A Discounted
Cost

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SUPSHIP Alternative "Bare Bones" Cost Summary (K$)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $2,730 $1,365 $1,365 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2 Personnel
New Const.)
$2,146 $215 $215 $215 $215 $215 $215 $215 $215 $215 $215
Repair)
$2,912 $291 $291 $291 $291 $291 $291 $291 $291 $291 $291

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SUPSHIP Bare Bones Alternative Risk Summary
Statistics: Value
Trials 1,000
Mean $500,605
Median $500,601
Mode ---
Variance $768,017
Skewness 0.07
Kurtosis 2.59
Range Width $4,401
Frequency Chart
Mean = $500,605
.000
.008
.015
.023
.030
0
7.5
15
22.5
30
$498,000 $499,250 $500,500 $501,750 $503,000
Forecast: Alternative "Bare Bones" Discounted Cost

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SUPSHIP Alternative "Qualitatively Equivalent" Cost Summary (K$)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $2,730 $1,365 $1,365 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2 Personnel
New Const.)
$7,997 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800
Repair)
$105,284 $10,528 $10,528 $10,528 $10,528 $10,528 $10,528 $10,528 $10,528 $10,528 $10,528

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SUPSHIP “Qualitatively Equivalent” Alternative Risk Summary
Statistics: Value
Trials 1,000
Mean $648,781
Median $648,383
Mode ---
Variance $1,528,601,001
Skewness -0.06
Kurtosis 2.70
Range Width $228,258
Mean Standard Error $1,236.37
Frequency Chart
Mean = $648,791
.000
.008
.016
.024
.032
0
8
16
24
32
$525,000 $581,250 $637,500 $693,750 $750,000
Forecast: Alternative “Qualitatively Equivalent” Discounted Cost

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1 Basis of Estimate – SUPSHIP
1.1 SUPSHIP Status Quo
1.1.1 Definition:
Alternative S-SQ is defined as leaving the CAS function as the responsibility of SUPSHIP.
SUPSHIP would continue to operate in the same manner as they do today. More specifically,
personnel in their existing roles would accomplish the CAS, delegated CAS, and non-CAS
workload.
1.1.2 Element 1.1 - Training
There are no investment costs for the status quo alternative. The personnel assigned to
each SUPSHIP to accomplish the workload associated with CAS, delegated CAS, and non-CAS
are trained appropriately and no additional up-front training is required.
1.1.3 Element 1.2 - System Interface Design
There are no investment costs for the status quo alternative. Each SUPSHIP information
system is currently interfaced with all other necessary information systems so there are no
additional up-front system interface costs.
1.1.4 Element 2.1 - Recurring Training
Recurring training costs are buried in the burdened labor rates in element 2.2e – 2.2f.
1.1.5 Element 2.2a - DCMC Personnel (Additional for New Construction)
There are no costs for this element under the status quo alternative since DCMC does not
perform new construction CAS functions at SUPSHIP. There are no additional DCMC costs for
new construction personnel.
1.1.6 Element 2.2b - DCMC Personnel (Additional for Repair)
There are no costs for this element under the status quo alternative since DCMC does not
perform repair CAS functions at SUPSHIP. There are no additional DCMC costs for repair
personnel.
1.1.7 Element 2.2c - SUPSHIP Non-CAS Personnel (Additional for New
Construction)
There are no costs for this element under the status quo alternative since the existing
SUPSHIP personnel satisfy the non-CAS new construction workload requirement. As such, no
additional personnel are required. Existing non-CAS costs are also not captured because this
analysis focuses on the CAS functions only.
1.1.8 Element 2.2d - SUPSHIP Non-CAS Personnel (Additional for Repair)
There are no costs for this element under the status quo alternative since the existing
SUPSHIP personnel satisfy the non-CAS repair workload requirement. As such, no additional

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personnel are required. Existing non-CAS costs are also not captured because this analysis
focuses on the CAS functions only.
1.1.9 Element 2.2e - SUPSHIP CAS Personnel (New Construction)
This cost element captures the costs associated with the new construction CAS workload
at the SUPSHIPs. The information is based on the 1997 SUPSHIP workload and was provided
by the NAVSEA SUPSHIP Management Office.
SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
Bath 61.0
Groton 57.7
Jacksonville 1.5
New Orleans 87.7
Newport News 83.8
Pascagoula 85.4
Portsmouth 0
Puget Sound 0
San Diego 29.4
Total 406.5
Status Quo: New Construction CAS Workload at SUPSHIP
As shown by the chart, the total CAS workload associated with new construction is 406.5
work years. The workload is estimated as a decimal since under the status quo, personnel sharing
CAS and non-CAS duties perform the workload. This number was then multiplied by the average
new construction/repair “burdened” annual cost per CAS personnel ($67K). We multiplied by a
“burdened” cost to capture other non-personnel costs such as rent, utility, supplies, and training.
This cost estimate ($27.1M) was then applied from years 2000 through 2009.
1.1.9.1 Element 2.2f - SUPSHIP CAS Personnel (Repair)
This cost element captures the costs associated with repair workload at the SUPSHIPs.
The information is based on the 1997 SUPSHIP workload and was provided by the NAVSEA
SUPSHIP Management Office.

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SUPSHIP Facility
(Status Quo)
Bath 0.6
Groton 0.9
Jacksonville 56.8
New Orleans 20.7
Newport News 31.6
Pascagoula 15.9
Portsmouth 120.5
Puget Sound 25.9
San Diego 130.0
Total 402.9
Status Quo: Repair CAS Workload at SUPSHIP
As shown by the chart, the total CAS workload associated with repair is 402.9 work
years. This number was then multiplied by the average new construction/repair “burdened”
annual cost per CAS personnel ($67K). We multiplied by a “burdened” cost to capture other
non-personnel costs such as rent, utility, supplies, and training. This cost estimate ($26.8M) was
then applied from years 2000 through 2009.
1.2 SUPSHIP Alternative S-1A
1.2.1 Definition:
Alternative S-1A is defined as DCMC taking responsibility for the CAS functions at
SUPSHIP. Under this scenario, some percentage of existing SUPSHIP employees would become
DCMC employees. The SUPSHIP non-CAS workload would continue to be accomplished by
SUPSHIP personnel.
There are minimal training investment costs for Alternative S-1A. When the cadre of
existing SUPSHIP personnel become DCMC employees, they are already trained to do CAS
functions. Existing SUPSHIP employees will fill the non-CAS positions created as a result of
transferring workload to DCMC so most of their training costs are already embedded in their
burdened salaries. However, when these SUPSHIP personnel become DCMC personnel, they
may be required to participate in some DCMC-specific training. We assumed that the DCMC
repair personnel and the DCMC new construction CAS personnel would engage in one-time
DCMC training of $3K per employee. This includes class fees, travel, and per diem and could
range from $1.5K (low) to $4.5K (high). The most likely total, ~ $2.6M, was allocated across
two fiscal years ($1.3M per year).

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Existing SUPSHIP personnel may not fill all of the additional positions created by moving
CAS to DCMC. However, for the purposes of this analysis, we assumed that the number of new
hires would be small and therefore, the cost is negligible.
1.2.3 System Interface Design
There are some system interface costs that need to be captured in this alternative. Even
though the new DCMC personnel do not physically relocate, to take advantage of DCMC
information system synergy, the SUPSHIP CAS information systems and the DCMC CAS
information systems would have to share information. Thus, this alternative must include costs
for this interface. Based on the historical interface costs associated with other system interface
efforts and conversations with DCMC, we have assigned a cost of $1M to this. For risk analysis
purposes and to address a degree of uncertainty, we varied this cost between $500K and $1.5M.
Since existing SUPSHIP personnel assume the positions at DCMC, recurring training
costs are buried in the burdened labor rates in element 2.2a – 2.2d.
This cost element captures the DCMC personnel associated with new construction CAS
workload. For purposes of this study, the Navy, using this Project Team structure as the basis,
analyzed the impact of the CAS function transfer to DCMC and determined that CAS personnel
would increase. According to sample data and a workload analysis of the project team identified
by the NAVSEA SUPSHIP Management Office, if the CAS function were moved from SUPSHIP
to DCMC, CAS new construction personnel at the San Diego SUPSHIP would most likely
increase to 21 personnel. The workload stays the same (20.22), but 21 personnel (instead of
20.22) are needed to perform the work now. For risk analysis purposes, 22 personnel were used
as a “high estimate.” For the “low estimate”, we assumed that they will not increase at all
(20.22). The following table shows the results of the project team analysis and that the overall
team increases by 2.3%. Of this project team, ~47% (21/45) is CAS and ~53% (24/45) is non-
CAS. Applying this ratio to the 2.3% increase, 47% of the 2.3% (1.1%) is attributable to CAS
and 53% of the 2.3% (1.2%) is related to non-CAS.

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Sample Data (New Construction - San Diego)
Position Title
# of
People
CAS
Functions
Non-CAS
Functions
CAS
Workyears
Non-CAS
Workyears
Project Officer 1 11% 89% 0.11 0.89
CONREP 2 33% 66% 0.66 1.32
Admin. Contr. Office 7 92% 8% 6.44 0.56
Ship Manager 4 30% 70% 1.2 2.8
Engineering/Design 3 40% 60% 1.2 1.8
Surveyors 2 35% 65% 0.7 1.3
QA 3 100% 0% 3 0
Material 12 13% 87% 1.56 10.44
ILS 2 10% 90% 0.2 1.8
Progress/Business Rev 3 85% 15% 2.55 0.45
Config Control/Funds 2 85% 15% 1.7 0.3
Finance 1 90% 10% 0.9 0.1
Staff Support 2 0% 100% 0 2
Status Quo Staff Level 44.0 20.22 23.76
Total %
Increase
CAS %
Increase
Non-CAS
% Increase
Alternative S-1A Staff
Level (Most Likely)
45.0 2.3% 1.1% 1.2% 21.0 24.0
Level (Low)
44.0 0.0% 0.0% 0.0% 20.22 23.76
Level (High)
47.0 6.8% 3.2% 3.6% 22.0 25.0
Comparison of Number of New Construction CAS Personnel at San Diego for
the Status Quo and Alternative S-1A – Sample Data
In element 2.2e of the status quo alternative, we identified a workload of 406.5 work
years for CAS new construction. If we extrapolate the most likely project team ratio (20.22
personnel to 21 personnel) and increase CAS, new construction personnel by 1.1% (most likely)
across all of the SUPSHIPs, the total CAS personnel associated with new construction becomes
410.8. However, we need to round the partial personnel to whole personnel to get an accurate
representation of headcount. This total is 414 for an increase of 1.8%.

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SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
New Construction
CAS Workyears
New Construction
CAS Workyears
(Alt S-1A, Full)
Bath 61.0 61.6 62.0
Groton 57.7 58.3 59.0
New Orleans 87.7 88.6 89.0
Portsmouth 0 0.0 0.0
Puget Sound 0 0.0 0.0
San Diego 29.4 29.7 30.0
Total 406.5 410.8 414.0
Percentage Increase 1.1% 1.8%
Comparison of Number of New Construction CAS Personnel for
Since these personnel are now DCMC employees, we multiplied the personnel (414) times
the average unburdened SUPSHIP salary ($41K) times the DCMC burden factor (1.8) to
calculate an annual cost. We used the DCMC burden factor because these personnel are now
DCMC employees. This totals $30.2M per year. We extended this cost from 2000 through
2009.
Like element 2.2a, this cost element captures the DCMC personnel associated with repair
CAS workload. For purposes of this study, the Navy, using the Project Team structure as the
basis, analyzed the impact of the CAS function transfer to DCMC and determined that CAS
personnel would increase. According to sample data and a workload analysis of the project team
identified by the NAVSEA SUPSHIP Management Office, if the CAS function were moved from
SUPSHIP to DCMC, CAS repair personnel at the San Diego SUPSHIP would most likely
increase to 4 personnel. The workload stays the same (3.35), but 4 personnel (instead of 3.35) are
needed to perform the work now. For risk analysis purposes, 5 personnel were used as a “high
estimate.” For the “low estimate”, we assumed no increase at all (3.35). The following table
shows the results of the project team analysis, and that the overall team increases by 7.7%. In this
project team, ~29% (4/14) is CAS and ~71% (10/14) is non-CAS. Applying this ratio to the
7.7% increase, 29% of the 7.7% (2.2%) is attributable to CAS and 71% of the 7.7% (5.5%) is
related to non-CAS.

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Nine Week Availability Sample Data (Repair - San Diego)
Position Title
# of
People
CAS
Functions
Non-CAS
Functions
CAS
Workyears
Non-CAS
Workyears
Ship Superintendent 1 0% 100% 0 1
Admin. Contr. Officer 1 30% 70% 0.3 0.7
Program Manager 1 10% 90% 0.1 0.9
SBS (Trade Specific) 4 30% 70% 1.2 2.8
Quality Assurance 1 80% 20% 0.8 0.2
Material 1 5% 95% 0.05 0.95
Finance 1 10% 90% 0.1 0.9
Safety/Environment 1 60% 40% 0.6 0.4
Barge Representative 1 10% 90% 0.1 0.9
Design 1 10% 90% 0.1 0.9
Total %
Increase
CAS %
Increase
Non-CAS %
Increase
Level (Most Likely)
14.0 7.7% 2.2% 5.5% 4.0 10.0
Level (Low)
13.0 0.0% 0.0% 0.0% 3.35 9.65
Level (High)
16.0 23.1% 7.2% 15.9% 5.0 11.0
Comparison of Number of Repair CAS Personnel at San Diego for
In element 2.2f of the status quo alternative, we identified a workload of 402.9 work years
for repair CAS. If we extrapolate the most likely project team ratio (3.35 personnel to 4
personnel) and increase CAS repair personnel by 2.2% (most likely) across all of the SUPSHIPs,
the total CAS personnel associated with repair becomes 411.8. However, we need to round the
partial personnel to whole personnel to get an accurate representation of headcount. This total is
417 for an increase of 3.5%.

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SUPSHIP Facility Repair CAS Workyears
(Status Quo)
(Alt S-1A, Full)
Bath 0.6 0.6 1.0
Groton 0.9 0.9 1.0
New Orleans 20.7 21.2 22.0
Portsmouth 120.5 123.1 124.0
Puget Sound 25.9 26.5 27.0
San Diego 130 132.9 133.0
Total 402.9 411.8 417.0
Comparison of Number of Repair CAS Personnel for the Status Quo and Alternative S-1A
Since these personnel are now DCMC employees, we multiplied the number of personnel
(417) times the average unburdened SUPSHIP salary ($41K) times the DCMC burden factor
(1.8) to calculate an annual cost. We used the DCMC burden factor because these personnel are
now DCMC employees. This totals $30.4M per year. We extended this cost from 2000 through
2009.
1.2.7 Element 2.2c – SUPSHIP Non-CAS Personnel (Additional for New
Construction)
This cost element captures the additional personnel associated with new construction,
non-CAS functions at SUPSHIP if the CAS functions were transferred to DCMC. As described
in the main document, many of the personnel at the SUPSHIP facilities share both CAS and non-
CAS functions. Therefore, if certain predominantly CAS personnel become DCMC employees,
their formerly non-CAS workload must still be fulfilled. To fill these positions, SUPSHIP would
need to add billets as necessary. Even though these are non-CAS positions, the analysis captures
the total effect on the DoD for mission performance so we allocate additional costs for these
positions in this cost element.
For purposes of this study, the Navy, using the Project Team structure as the basis,
analyzed the impact of the CAS function transfer to DCMC and determined that the new
construction non-CAS personnel would also increase. According to sample data and a workload
analysis project team identified by the NAVSEA SUPSHIP Management Office, if the CAS
function were moved from SUPSHIP to DCMC, non-CAS new construction personnel at the San
Diego SUPSHIP would most likely increase to 24 personnel. The workload stays the same
(23.76), but 24 personnel (instead of 23.76) are needed to perform the work now. For risk
analysis purposes, 25 personnel were used as a “high estimate.” For the “low estimate”, we
assumed that they will not increase at all (23.76). The following table shows the results of the
project team analysis, and that the overall team increases by 2.3%. In this project team, ~47%
(21/45) is CAS and ~53% (24/45) is non-CAS. Applying this ratio to the 2.3% increase, 47% of
the 2.3% (1.1%) is attributable to CAS and 53% of the 2.3% increase (1.2%) is related to non-
CAS.

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Position Title
# of
People
CAS
Functions
Non-CAS
Functions
CAS
Workyears
Non-CAS
Workyears
Project Officer 1 11% 89% 0.11 0.89
CONREP 2 33% 66% 0.66 1.32
Admin. Contr. Office 7 92% 8% 6.44 0.56
Ship Manager 4 30% 70% 1.2 2.8
Engineering/Design 3 40% 60% 1.2 1.8
Surveyors 2 35% 65% 0.7 1.3
QA 3 100% 0% 3 0
Material 12 13% 87% 1.56 10.44
ILS 2 10% 90% 0.2 1.8
Progress/Business Rev 3 85% 15% 2.55 0.45
Config Control/Funds 2 85% 15% 1.7 0.3
Finance 1 90% 10% 0.9 0.1
Staff Support 2 0% 100% 0 2
Total %
Increase
CAS %
Increase
Non-CAS
% Increase
Level (Most Likely)
45.0 2.3% 1.1% 1.2% 21.0 24.0
Level (Low)
44.0 0.0% 0.0% 0.0% 20.22 23.76
Level (High)
47.0 6.8% 3.2% 3.6% 22.0 25.0
Comparison of Number of New Construction Non-CAS Personnel at San Diego for
If we extrapolate the most likely project team ratio (23.76 personnel to 24 personnel) and
increase non-CAS, new construction personnel by 1.2% (most likely) across all of the SUPSHIPs,
the additional non-CAS personnel associated with new construction is 9.1. However, we need to
round the partial personnel to whole personnel to get an accurate representation of headcount.
This total is 12 for an increase of 1.6%.

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SUPSHIP Facility
Workyears
(Status Quo)
Additional Non-CAS
New Construction
Workyears
Additional Non-CAS
New Construction
Workyears
(Alt S-1A, Full)
Bath 111.6 1.4 2.0
Groton 137.4 1.7 2.0
San Diego 43.2 0.5 1.0
Total 752.8 9.1 12.0
Comparison of Number of New Construction Non-CAS Personnel for
Since these personnel are still SUPSHIP employees, we multiplied the number of
personnel (12) times the average burdened SUPSHIP salary ($67K) to calculate an annual cost.
We used the SUPSHIP burden factor because these personnel would be SUPSHIP employees.
This totals $800K per year. We extended this cost from 2000 through 2009.
1.2.8 Element 2.2d – SUPSHIP Non-CAS Personnel (Additional for Repair)
This cost element captures the additional personnel associated with repair non-CAS
functions at SUPSHIP if the CAS functions were transferred to DCMC. As described in the main
document, many of the personnel at the SUPSHIP facilities share both CAS and non-CAS
functions. Therefore, if certain predominantly CAS personnel become DCMC employees, their
formerly non-CAS workload must still be fulfilled. To fill these positions, SUPSHIP would need
to add billets as necessary. Even though these are non-CAS positions, the analysis captures the
total effect on the DoD so we allocate additional costs for these positions in this cost element.
For purposes of the study, the Navy, using the Project Team structure as the basis,
analyzed the impact of the CAS function transfer to DCMC and determined that the repair non-
CAS personnel would also increase. According to sample data and a workload analysis project
team identified by the NAVSEA SUPSHIP Management Office, if the CAS function were moved
from SUPSHIP to DCMC, non-CAS repair personnel at the San Diego SUPSHIP would most
likely increase.
The workload stays the same (9.65), but 10 personnel (instead of 9.65) are needed to
perform the work now. For risk analysis purposes, 11 personnel were used as a “high estimate.”
For the “low estimate”, we assumed that they will not increase at all (9.65). The following table
shows the results of the project team analysis, and that the overall team increases by 7.7%. In this
project team, ~29% (4/14) is CAS and ~71% (10/14) is non-CAS. Applying this ratio to the
7.7% increase, 29% of the 7.7% (2.2%) is attributable to CAS and 71% of the 7.7% (5.5%) is
related to non-CAS.

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Position Title
# of
People
CAS
Functions
Non-CAS
Functions
CAS
Workyears
Non-CAS
Workyears
Ship Superintendent 1 0% 100% 0 1
Admin. Contr. Officer 1 30% 70% 0.3 0.7
Program Manager 1 10% 90% 0.1 0.9
SBS (Trade Specific) 4 30% 70% 1.2 2.8
Quality Assurance 1 80% 20% 0.8 0.2
Material 1 5% 95% 0.05 0.95
Finance 1 10% 90% 0.1 0.9
Safety/Environment 1 60% 40% 0.6 0.4
Barge Representative 1 10% 90% 0.1 0.9
Design 1 10% 90% 0.1 0.9
Total %
Increase
CAS %
Increase
Non-CAS %
Increase
Level (Most Likely)
14.0 7.7% 2.2% 5.5% 4.0 10.0
Level (Low)
13.0 0.0% 0.0% 0.0% 3.35 9.65
Level (High)
16.0 23.1% 7.2% 15.9% 5.0 11.0
Comparison of Number of Repair Non-CAS Personnel at San Diego for
increase personnel by 5.5% (most likely) across all of the SUPSHIPs, the additional non-CAS
personnel associated with repair is 60.6. However, we need to round the partial personnel to
whole personnel to get an accurate representation of headcount. This total is 65 for an increase
of 5.9%.

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SUPSHIP Facility
CAS Repair Workyears
(Status Quo)
Additional Non-CAS
Repair Workyears
Additional Non-CAS
Repair Workyears
(Alt S-1A, Full)
Bath 44.8 2.5 3.0
Groton 14.4 0.8 1.0
Portsmouth 296.5 16.3 17.0
San Diego 327.6 18.0 18.0
Total 1,102.6 60.6 65.0
Comparison of Number of Repair Non-CAS Personnel for the Status Quo and Alternative S-1A
We used the SUPSHIP burden factor because these personnel will be SUPSHIP employees. This
totals $4.3M per year. We extended this cost from 2000 through 2009.
1.2.9 Element 2.2e – SUPSHIP CAS Personnel (New Construction)
There are no costs under this element for this alternative since the new construction CAS
personnel have switched hats and become DCMC employees. The costs are now captured in
element 2.2a.
1.2.10 Element 2.2f – SUPSHIP CAS Personnel (Repair)
There are no costs under this element for this alternative since the repair CAS personnel
have switched hats and become DCMC employees. The costs are now captured in element 2.2b.
1.3 SUPSHIP “Qualitatively Equal” Alternative
1.3.1 Definition:
The "Qualitatively Equal" alternative is defined as DCMC taking responsibility for the
CAS functions at SUPSHIP. Under this scenario, some percentage of existing SUPSHIP
employees would become DCMC employees. The SUPSHIP non-CAS workload would continue
to be accomplished by SUPSHIP personnel. The number of DCMC CAS billets and SUPSHIP
non-CAS billets would be increased to provide a level of service and responsiveness projected to
equal that in the current scenario. The analysis for this alternative is provided in Appendix B.
There are minimal training investment costs for this alternative. When the cadre of
existing SUPSHIP personnel become DCMC employees, they are already trained to do CAS
functions. However, when these SUPSHIP personnel become DCMC personnel, they may be
required to participate in some DCMC-specific training. We assumed that the DCMC repair
personnel and the DCMC new construction personnel would engage in one-time DCMC training

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of $3K per person. This includes class fees, travel, and per diem and it could range from $1.5K
(low) to $4.5K (high). This totals ~ $2.6M which was allocated across two fiscal years ($1.3M
per year).
information systems would have to be able to exchange data. Thus, this alternative must include
costs for this interface. Based on the historical interface costs associated with previous system
interfaces and conversations with DCMC, we have assigned a cost of $1M to this. For risk
analysis purposes and to address a degree of uncertainty, we varied this cost between $500K and
$1.5M.
costs are buried in the burdened labor rates in element 2.2a – 2.2d. Similarly, existing SUPSHIP
personnel assume the new non-CAS positions. Their recurring training is also included in their
burdened rates.
workload. For purposes of the study, the Navy, using the Project Team structure as the basis,
analyzed the impact of the CAS function transfer to DCMC and determined that CAS personnel
would increase. According to sample data and a workload analysis project team identified by the
NAVSEA SUPSHIP Management Office, if the CAS function were moved from SUPSHIP to
DCMC, CAS new construction personnel at the San Diego SUPSHIP would most likely increase
to 21 personnel. The workload stays the same (20.22), but 21 personnel (instead of 20.22) are
estimate.” For the “low estimate”, we assumed that they will not increase at all (20.22). The
following table shows the results of the project team analysis.

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Position Title # of People CAS Functions
Non-CAS
Functions
CAS
Workyears
Project Officer 1 11% 89% 0.11
CONREP 2 33% 66% 0.66
Admin. Contr. Office 7 92% 8% 6.44
Ship Manager 4 30% 70% 1.2
Engineering/Design 3 40% 60% 1.2
Surveyors 2 35% 65% 0.7
QA 3 100% 0% 3
Material 12 13% 87% 1.56
ILS 2 10% 90% 0.2
Progress/Business Rev 3 85% 15% 2.55
Config Control/Funds 2 85% 15% 1.7
Finance 1 90% 10% 0.9
Staff Support 2 0% 100% 0
Status Quo Staff Level 44 20.22
Alternative S-1A Staff Level (Most Likely) 21
Alternative S-1A Staff Level (Low) 20.22
Alternative S-1A Staff Level (High) 22
In element 2.2e of the status quo alternative, we identified a work load of 406.5 work
years for CAS new construction. If we extrapolate the most likely project team ratio (20.22
personnel to 21 personnel) and increase personnel by 3.9% (most likely) across all of the
SUPSHIPs, the total CAS personnel associated with new construction becomes 422.2. However,
we need to round the partial personnel to whole personnel to get an accurate representation of
headcount. This total is 426 for an increase of 4.8%.
SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
New Construction
CAS Workyears
New Construction
CAS Workyears
(Alt S-1A, Full)
Bath 61.0 63.4 64
Groton 57.0 59.9 60
Jacksonville 1.5 1.6 2
New Orleans 87.7 91.1 92
Newport News 83.8 87.0 88
Pascagoula 85.4 88.7 89
Portsmouth 0 0 0
Puget Sound 0 0 0
San Diego 29.4 30.5 31
Total 422.2 426.0

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Since these personnel are now DCMC employees, we multiplied the number of personnel (426) by
the average unburdened SUPSHIP salary ($41K) then by the DCMC burden factor (1.8) to
calculate the annual cost. The DCMC burden factor was used since these personnel are DCMC
employees. The total is $31.1M per year. These costs were extended from 2000 to 2009.
CAS workload. For purposes of this study, the Navy, using the Project Team structure as the
basis, analyzed the impact of the CAS function transfer to DCMC and determined that CAS
personnel would increase. According to sample data and a workload analysis project team
SUPSHIP to DCMC, CAS repair personnel at the San Diego SUPSHIP would most likely
increase to 4 personnel. The workload stays the same (3.35), but 4 personnel (instead of 3.35) are
estimate.” For the “low estimate”, we assumed that they will not increase at all (3.35). The
following table show the results of the project team analysis.
Position Title # of People
CAS
Functions
Non-CAS
Functions
CAS
Workyears
Ship Superintendent 1 0% 100% 0
Admin. Contr. Officer 1 30% 70% 0.3
Program Manager 1 10% 90% 0.1
SBS (Trade Specific) 4 30% 70% 1.2
Quality Assurance 1 80% 20% 0.8
Material 1 5% 95% 0.05
Finance 1 10% 90% 0.1
Safety/Environment 1 60% 40% 0.6
Barge Representative 1 10% 90% 0.1
Design 1 10% 90% 0.1
Status Quo Staff Level 13.0 3.35
Comparison of Number of Repair CAS Personnel at San Diego for
for repair CAS. If we extrapolate the most likely project team ratio (3.35 personnel to 4
personnel) and increase personnel by 19.4% (most likely) across all of the SUPSHIPs, the total
CAS personnel associated with repair becomes 481.1. However, we need to round the partial
personnel to whole personnel to get an accurate representation of headcount. This total is 484 for
an increase of 20.1%.

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SUPSHIP Facility
(Status Quo)
Repair CAS
Workyears
Repair CAS
Workyears
(Alt S-1A, Full)
Bath 0.6 0.7 1.0
Groton 0.9 1.1 2.0
Jacksonville 56.8 67.8 68
New Orleans 20.7 24.7 25
Newport News 31.6 37.7 38
Pascagoula 15.9 19.0 19
Portsmouth 120.5 143.9 144
Puget Sound 25.9 30.9 31
San Diego 130 155.2 156
Total 402.9 481.1 48
Comparison of Number of Repair CAS Personnel for the Status Quo and Alternative S-1A
2009.
Construction)
non-CAS functions at SUPSHIP if the CAS functions were transferred to DCMC. Many of the
personnel at the SUPSHIP facilities share both CAS and non-CAS functions. Therefore, if certain
predominantly CAS personnel become DCMC employees, their formerly non-CAS workload
must still be fulfilled. To fill these positions, SUPSHIP would add billets as necessary. Even
though these are non-CAS positions, the analysis captures the total effect on the DoD so we
allocate additional costs for these positions in this cost element.
analyzed the impact of the CAS function transfer to DCMC and determined that non-CAS
personnel would also increase. According to sample data and a workload analysis project team
SUPSHIP to DCMC, non-CAS new construction personnel at the San Diego SUPSHIP would
most likely increase to 24 personnel. The workload stays the same (23.76), but 24 personnel
(instead of 23.76) are needed to perform the work now. For risk analysis purposes, 25 personnel
were used as a “high estimate.” For the “low estimate”, we assumed that they will not increase at
all (23.76). The following table shows the results of the project team analysis.

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Position Title # of People
CAS
Functions
Non-CAS
Functions
Non-CAS
Workyears
Project Officer 1 11% 89% 0.89
CONREP 2 33% 66% 1.32
Admin. Contr. Office 7 92% 8% 0.56
Ship Manager 4 30% 70% 2.8
Engineering/Design 3 40% 60% 1.8
Surveyors 2 35% 65% 1.3
QA 3 100% 0% 0
Material 12 13% 87% 10.44
ILS 2 10% 90% 1.8
Progress/Business Rev 3 85% 15% 0.45
Config Control/Funds 2 85% 15% 0.3
Finance 1 90% 10% 0.1
Staff Support 2 0% 100% 2
Status Quo Staff Level 44 23.76
Comparison of Number of New Construction Non-CAS Personnel at San Diego for
increase personnel by 1.0% (most likely) across all of the SUPSHIPs, the additional non-CAS
personnel associated with new construction is 7.6. However, we need to round the partial

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SUPSHIP Facility
Workyears
(Status Quo)
Construction
Workyears
Construction
Workyears
(Alt S-1A, Full)
Bath 111.6 1.1 2.0
Groton 137.44 1.4 2.0
New Orleans 147.42 1.5 2.0
Portsmouth 0 0.0 0.0
Puget Sound 0 0.0 0.0
San Diego 43.15 0.4 1.0
Total 7,522.78 7.6 12
Percentage Increase 1.0% 1.6
We used the SUPSHIP burden factor because these personnel are still SUPSHIP employees. This
totals $800K per year. We extended this cost from 2000 through 2009.
This cost element captures the additional personnel associated with repair non-CAS
functions at SUPSHIP if the CAS functions were transferred to DCMC. Many of the personnel at
the SUPSHIP facilities share both CAS and non-CAS functions. Therefore, if certain
predominantly CAS personnel become DCMC employees, their formerly non-CAS workload
must still be fulfilled. To fill these positions, SUPSHIP would add billets as necessary. Even
though these are non-CAS positions, the analysis captures the total effect on the DoD so we
allocate additional costs for these positions in this cost element.
analyzed the impact of the CAS function transfer to DCMC and determined that non-CAS
personnel would also increase. According to sample data and a workload analysis project team
SUPSHIP to DCMC, non-CAS repair personnel at the San Diego SUPSHIP would most likely
increase to 11 personnel. The workload stays the same (9.65), but 11 personnel (instead of 9.65)
are needed to perform the work now. For risk analysis purposes, 12 personnel were used as a
“high estimate.” For the “low estimate”, we assumed that they will not increase at all (9.65). The
following table show the results of the project team analysis.

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Position Title
# of
People
CAS
Functions
Non-CAS
Functions
Non-CAS
Workyears
Ship Superintendent 1 0% 100% 1
Admin. Contr. Officer 1 30% 70% 0.7
Program Manager 1 10% 90% 0.9
SBS (Trade Specific) 4 30% 70% 2.8
Quality Assurance 1 80% 20% 0.2
Material 1 5% 95% 0.95
Finance 1 10% 90% 0.9
Safety/Environment 1 60% 40% 0.4
Barge Representative 1 10% 90% 0.9
Design 1 10% 90% 0.9
Status Quo Staff Level 13.0 9.65
Comparison of Number of Repair Non-CAS Personnel at San Diego for
increase personnel by 14% (most likely) across all of the SUPSHIPs, the additional non-CAS
personnel associated with new construction is 154.3. However, we need to round the partial
SUPSHIP Facility
(Status Quo)
Additional Non-CAS
Repair Workyears
Additional Non-CAS
Repair Workyears (Alt S-
1A, Full)
Bath 44.8 6.3 7.0
Groton 14.47 2.0 3.0
Newport News 113.69 15.9 16.0
Portsmouth 296.5 41.5 42.0
Puget Sound 75.7 10.6 11.0
San Diego 327.55 45.8 46.0
Total 1,102.63 154.3 158.0
Percentage Increase 14% 14.3%
Comparison of Number of Repair Non-CAS Personnel for the Status Quo and Alternative S-1A
totals $10.5M per year. We extended this cost from 2000 through 2009.

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element 2.2a.
There are no costs under this element for this alternative since the active repair CAS
element 2.2b.
1.4 SUPSHIP “Bare Bones” Alternative
1.4.1 Definition:
Alternative “Bare Bones” is defined as DCMC taking responsibility for the CAS functions
at SUPSHIP with the transfer of some percentage of existing SUPSHIP employees to DCMC. No
employees, beyond the minimum required to achieve whole-person rounding, would be added to
the SUPSHIP-DCMC mix to compensate for the lost synergy of the integrated CAS/non-CAS
personnel who currently make up the SUPSHIP project teams. The SUPSHIP non-CAS
workload would continue to be accomplished by SUPSHIP personnel.
There are minimal training investment costs for the Bare Bones Alternative. When the
cadre of existing SUPSHIP personnel become DCMC employees, they are already trained to do
CAS functions. However, when these SUPSHIP personnel become DCMC personnel, they may
be required to participate in some DCMC-specific training. We assumed that the DCMC repair
personnel and the DCMC new construction personnel would engage in one-time DCMC training
of $3K. This includes class fees, travel, and per diem and it could range from $1.5K (low) to
$4.5K (high). This totals ~ $2.6M which was allocated across two fiscal years ($1.3M per year).
information systems would need to be able to exchange data. Thus, this alternative must include
costs for this interface. Based on the historical interface costs associated with previous system
interfaces and conversations with DCMC, we have assigned a cost of $1M to this. For risk
analysis purposes and to address a degree of uncertainty, we varied this cost between $500K and
$1.5M.

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costs are buried in the burdened labor rates in element 2.2a – 2.2d.
workload. For the Bare Bones Alternative, we assumed that if the CAS function were transferred
to DCMC, the number of new construction CAS staff would increase only slightly as a result of
rounding to whole bodies at the SUPSHIP locations.
SUPSHIP Facility
New Construction
CAS Workyears
(Status Quo)
New Construction
CAS Workyears
Bare Bones)
Bath 61.0 61.0
Groton 57.7 58.0
Jacksonville 1.5 2.0
New Orleans 87.7 88.0
Newport News 83.8 84.0
Pascagoula 85.4 86.0
Portsmouth 0 0.0
Puget Sound 0 0.0
San Diego 29.4.0 30.0
Total 406.5 409.0
Percentage Increase 0.6%
the Status Quo and Bare Bones Alternative – Sample Data
In element 2.2e of the status quo alternative, we identified a work load of 406.5 work
years for CAS new construction. If we use the Bare Bones methodology, new construction CAS
personnel increase by .6% across all of the SUPSHIPs, and the total CAS personnel associated
with new construction becomes 409.
2009.
CAS workload. For the Bare Bones Alternative, we assumed that if the CAS function were
transferred to DCMC, the number of repair CAS staff would increase only slightly as a result of

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SUPSHIP Facility
Repair CAS
Workyears
(Status Quo)
Repair
CAS Workyears
Bare Bones)
Bath 0.6 1
Groton 0.9 1
New Orleans 20.7 21
Pascagoula 15.9 16
Puget Sound 25.9 26
San Diego 130 130
Total 402.9 405.0
Comparison of Number of Repair CAS Personnel for
for repair CAS. If we use the Bare Bones methodology, repair CAS personnel increase by .5%
across all of the SUPSHIPs, and the total CAS personnel associated with new construction
becomes 405.
2009.
Construction)
non-CAS functions at SUPSHIP if the CAS functions were transferred to DCMC. As described
in the main document many of the personnel at the SUPSHIP facilities share both CAS and non-
CAS functions. Therefore, if certain predominantly CAS personnel become DCMC employees,
their formerly non-CAS workload must still be fulfilled. To fill these positions, SUPSHIP would
add billets as necessary. Even though these are non-CAS positions, the analysis captures the total
effect on the DoD for mission performance so we allocate additional costs for these positions in
this cost element.
For the Bare Bones Alternative, we assumed that if the CAS function were transferred to
DCMC, the number of new construction non-CAS staff would increase only slightly as a result of

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SUPSHIP Facility
Total Non-CAS New
(Bare Bones)
(Bare Bones)
Bath 111.6 112.0 0.4
Groton 137.4 138.0 0.6
New Orleans 147.4 148.0 0.6
Newport News 156.9 157.0 0.1
Pascagoula 155.4 156.0 0.6
San Diego 43.2 44.0 0.9
Total 752.8 756.0 3.2
If we use the Bare Bones methodology, new construction non-CAS personnel increase by
.4% across all of the SUPSHIPs, and the additional non-CAS personnel associated with new
construction becomes 3.2.
personnel (3.2) times the average burdened SUPSHIP salary ($67K) to calculate an annual cost.
This cost element captures the additional personnel associated with repair, non-CAS
functions at SUPSHIP if the CAS functions were transferred to DCMC. As described in the main
document many of the personnel at the SUPSHIP facilities share both CAS and non-CAS
functions. Therefore, if certain predominantly CAS personnel become DCMC employees, their
formerly non-CAS workload must still be fulfilled. To fill these positions, SUPSHIP would need
to add billets as necessary. Even though these are non-CAS positions, the analysis captures the
total effect on the DoD so we allocate additional costs for these positions in this cost element.
For the Bare Bones Alternative, we assumed that if the CAS function were transferred to
DCMC, the number of repair non-CAS staff would increase only slightly as a result of rounding to
whole bodies at the SUPSHIP locations.

DUSD(AR)
SUPSHIP Facility
(Status Quo)
Total Non-CAS Repair
Workyears
(Bare Bones)
Additional Non-CAS
Repair Workyears
(Bare Bones)
Bath 44.8 45 0.2
Groton 14.4 15 0.6
Jacksonville 120.5 121 0.5
New Orleans 34.2 35 0.8
Newport News 113.7 114 0.3
Pascagoula 75.3 76 0.7
Portsmouth 296.5 297 0.5
Puget Sound 75.7 76 0.3
San Diego 327.6 328 0.4
Total 1,102.6 1,107.0 4.4
Comparison of Number of Repair Non-CAS Personnel for
If we use the Bare Bones methodology, repair non-CAS personnel increase by .4% across
all of the SUPSHIPs, and the additional non-CAS personnel associated with new construction
becomes 4.4.
personnel (4.4) times the average burdened SUPSHIP salary ($67K) to calculate an annual cost.
element 2.2a.
There are no costs under this element for this alternative since the repair CAS personnel

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Booz·Allen & Hamilton F-1 May 14, 1999
Appendix F: ONR Detailed Cost Estimate

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ONR Status Quo Cost Summary (K$)
(ONR retain CAS functions)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
1.2 System Interface Design $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Constant) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Inflated) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Discounted) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.1 Recurring Training $0 Included in Labor Rate in Elements 2.2b
2.2 Personnel Costs
2.2a DCMC Personnel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2b ONR CAS Personnel $50,649 $6,462 $6,236 $6,018 $5,807 $5,604 $5,408 $5,219 $5,036 $4,860 $4,690

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ONR Status Quo Risk Summary
Statistics: Value
Trials 1,000
Mean $42,974
Median $42,974
Mode $42,974
Variance $0
Skewness 0.00
Kurtosis +Infinity
Range Width $0
Frequency Chart
.000
.250
.500
.750
1.000
0
250
500
750
1000
$42,974 $42,974 $42,974 $42,974 $42,974
Forecast: Alternative O-SQ Discounted Costs

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ONR Alternative 0-1B Cost Summary (K$)
(ONR CAS functions transfer to DCMC. 3 FTEs are retained by ONR and 73 ONR CAS FTEs become DCMC employees.)
(DCMC will eventually reduce CAS staff for economies of scale.)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $219 $110 $110 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Constant) $1,219 $610 $610 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Inflated) $1,261 $624 $638 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Discounted) $1,156 $588 $568 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.1 Recurring Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2 Personnel Cost
2.2a DCMC Personnel $47,489 $6,664 $6,664 $5,998 $5,398 $4,858 $4,373 $3,935 $3,542 $3,188 $2,869
2.2b ONR CAS Personnel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2c ONR Headquarters Personnel $2,551 $255 $255 $255 $255 $255 $255 $255 $255 $255 $255

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ONR Alternative O-1A Risk Summary
Statistics: Value
Trials 1,000
Mean $44,148
Median $42,861
Mode ---
Variance $24,021,097
Skewness 0.35
Kurtosis 2.59
Range Width $23,321
Frequency Chart
Mean = $44,148
.000
.008
.016
.023
.031
0
7.75
15.5
23.25
31
$32,500 $38,750 $45,000 $51,250 $57,500
Forecast: Alternative O-1B Discounted Costs

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1 Basis of Estimate, ONR
1.1 ONR Status Quo
1.1.1 Definition:
Alternative O-SQ is defined as leaving the CAS function as the responsibility of
ONR. ONR would continue to operate in the same fashion, administering grants and
contracts for the DoD, as well as other Federal Agencies.
1.1.2 Element 1.1 – Training
There are no investment costs for the status quo alternative. The ONR offices,
including headquarters and the regional offices operate as they are currently operating, so
there are no investment training costs.
1.1.3 Element 1.2 – System Interface Costs
There are no investment costs for the status quo alternative. The existing
Contract Administration Management Information System (CAMIS) is currently being
upgraded and is 80% complete. This cost is already reflected in the actual direct
overhead that is applied to the burdened labor rates in element 2.2b.
1.1.4 Element 2.1 – Recurring Training
Recurring training costs are included in the burdened labor rates in element 2.2b.
1.1.5 Element 2.2a – DCMC Personnel
There are no costs for this element under the status quo alternative since ONR offices will
staff their CAS with ONR personnel. Therefore, there are no additional DCMC costs.
1.1.6 Element 2.2b – ONR Personnel
This element captures all ONR personnel at the Headquarters Office, Regional
Offices, and SRB. Based on interviews with the Headquarters Office in Arlington
Virginia, of the total current ONR personnel (81), 78 FTEs are 100% dedicated to CAS.
The other 3 ONR personnel are involved in Program Management and other supervisory
functions.
Costs were estimated by determining the number of FTEs that are paid out of the
ONR budget, which includes the number of reimbursable billets from NASA (23). This
final number of FTEs was then multiplied by the average ONR personnel salary ($51K)
and the ONR "burden rate" (1.68). We multiplied the total number of FTEs for each year
by a "burden rate" to capture other non-personnel costs such as rent, utility, supplies,
systems and training. This cost estimate was applied for years 2000 through 2009.
The original number of FTEs accounted for year 1999 was 81; however, for year
2000, that number will be reduced to 76. For year 2001, and all subsequent years
throughout the life cycle, there will be a 3.5% annual rate of reduction in FTEs. This
3.5% was based on discussions with ONR regarding historical and projected rates of
reduction. The following table provides a schedule of FTEs phased out by year 2009.

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ONR Offices ONR Employees in 2000 ONR Employees in 2009
Virginia, Headquarters 7 5
Albuquerque, NM 0 0
Atlanta, GA 14 10
Austin, TX 0 0
Boston, MA 16 12
Chicago, IL 15 11
San Diego, CA 14 10
Seattle, WA 10 7
Total FTEs: 76 55
1.2 ONR Alternative 0-1B
1.2.1 Definition:
Alternative O-1A is defined as transitioning the CAS function from ONR to
DCMC. As baselined by ONR, starting in year 2000, 73 ONR CAS personnel would
become DCMC employees and physically relocate to a nearby CAO while 3 FTEs would
be retained by ONR Headquarters.
There are minimal training investment costs for Alternative O-1B. When the cadre
of 73 ONR personnel become DCMC employees, they are already trained to perform CAS
functions. However, when these ONR personnel become DCMC personnel, they may be
required to participate in training related to DCMC policies and procedures. We assumed
that 73 FTEs would engage in one-time DCMC training of $3K. Total training cost of ~
$219K was allocated across two years ($109 K per year). For risk purposes, we used a
low end cost of $1.5K per FTE and a high of $4.5K per FTE for this training cost
element.
There are some system interface costs that need to be captured in this alternative.
With the transfer of people and functions to DCMC , the DCMC Contract Administration
system, MOCAS, would need to interface with data from ONR's system, CAMIS. This
would require the development of an interface between the two systems and perhaps the
purchase of hardware and software. Based on the historical interface costs associated
with the systems and interviews with Systems Engineers at ONR and DCMC, we have
assigned a cost of $1M to this. For risk analysis, we varied this cost between $500K and
$1.5M.
This captures the annual employee training at DCMC; it is included in the DCMC
burden.

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1.2.5 Element 2.2a – DCMC Personnel
ONR CAS personnel are transferred into DCMC. For years 2000 and 2001, no
change will occur for the number of newly transferred CAS DCMC FTEs (73). However,
for years 2002 and following, we included an annual 10% reduction of DCMC staff, as
shown in the following schedule. This 10% figure is based on the predicted natural
downsizing of DCMC plus the predicted efficiencies expected from the transfer of
functions to DCMC. For risk analysis purposes, we assumed that 20% is the highest
reduction rate and the lowest reduction rate is 0%.
Year ONR Transferred CAS FTEs
2000 73
2001 73
2002 66
2003 59
2004 53
2005 48
2006 43
2007 39
2008 35
2009 31
The cost for this element is comprised of the number of ONR FTEs transferred to
the CAOs multiplied by the average ONR CAS salary ($51K) multiplied by the DCMC
burden rate (1.8). We applied the DCMC burden rate because former ONR personnel are
now DCMC employees. We maintained the ONR salary figure since the ONR employees
would maintain their current salaries when transferred. The DCMC burden rate captures
nonpersonnel costs such as rent, utility, supplies, systems, and training. This cost estimate
was then applied through years 2000 through 2009.
1.2.6 Element 2.2b – ONR CAS Personnel
There is no cost for this element under this alternative since ONR CAS personnel
become DCMC employees. The cost are now captured in element 2.2a.
1.2.7 Element 2.2c – ONR Headquarters Personnel
This cost element captures a total of 3 FTEs required to various non-CAS
functions, such as program management, policy, university relations and headquarters
operational functions.
The cost for this element is comprised of the number of ONR Headquarters FTEs
multiplied by the average ONR salary ($51K) multiplied by the ONR burden rate (1.68).
This cost estimate was then applied through years 2000 through 2009.

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Booz·Allen & Hamilton G-1 May 14, 1999
APPENDIX G
DETAILED AAP INFORMATION

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APPENDIX G-- DETAILED AAP INFORMATION
Table G-1a, Active GOCO AAPs
ACTIVE
PLANTS
LOCATION PRODUCTS CONTRACTOR
Hawthorne
Army Depot
Hawthorne, NV • Receive, issue, store, renovate, test,
demilitarize, & provide Quality
Assurance Specialist (Ammunition
Surveillance) (QASAS)/depot storage for
conventional ammunition
• Operate calibration lab & ballistics
test facility
• Maintain capability to receive/ship
containerized cargo
• Perform special missions &
assignments as required
Day & Zimmerman/
Hawthorne Corporation
Holston AAP Kingsport, TN • Manufacture explosive and chemical
materials
• Handle and store strategic and
critical materials for other Government
agencies
Royal Ordnance of North
America
Iowa AAP Middletown, IA • Load, assemble, and pack (LAP)
ammunition items
• Perform special mission assignments
• Maintain capability to receive/ship
containerized cargo
• Perform QASAS/storage surveillance
functions
American Ordnance LLC
Lake City AAP Independence, MO • Manufacture small arms ammunition
and associated explosive/pyrotechnic
materials
• Proof test small arms ammunition
• Perform certification inspection of
small arms ammunition inspection
equipment in support of small caliber
ammunition procurement and production
mission
• Provide special test and measurement
services to monitor activities of the
contractor's calibration system for the
quality assurance function.
• Coordinate, support, and assist in the
development, installation, and test and
evaluation of prototype production
equipment in support of small caliber
ammunition programs
• Maintain the capability to
receive/ship containerized cargo
functions, to include support of Sunflower
AAP
Olin Corporation

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ACTIVE
PLANTS
LOCATION PRODUCTS CONTRACTOR
Lone Star AAP Texarkana, TX • Load, assemble, and pack
ammunition items
functions
Day & Zimmermann, Inc.
Milan AAP Milan, TN • Load, assemble, and pack
ammunition items
• Handle and store ammunition as
directed
• Provide QASAS/storage surveillance
functions
American Ordnance LLC
Radford AAP Radford, VA • Manufacture propellants, explosives,
and chemical materials
• Provide QASAS/storage surveillance
Alliant Techsystems, Inc.
Table G-1b, Inactive GOCO AAPs
INACTIVE
PLANTS
LOCATION STATUS CONTRACTOR
Alabama Childersburg, AL Excess facilities None
Badger Baraboo, WI Excess facilities under environmental
remediation
Olin Corporation
Cornhusker Grand Island, NE Excess facilities under environmental
remediation
ICI Americas, Inc.
Indiana Charlestown, IN Excess facilities under environmental
remediation
ICI Americas, Inc.
Joliet Joliet, IL Excess facilities under environmental
remediation
None
Kansas Parsons, KS Inactive-standby facilities Day & Zimmermann, Inc.
Longhorn/
Louisiana
Doyline, LA Longhorn is excess and administratively
combined with Louisiana AAP which is an
Army Reserve Plant
Valentec Systems, Inc.
Mississippi Stennis Space
Center, MI
Army Reserve Plant Mason Technologies, Inc.
Ravenna Ravenna, OH Inactive-standby facilities Mason and Hanger, Silas
Mason, Co., Inc.
Riverbank Riverbank, CA Army Reserve Plant NI Industries, Inc
Scranton Scranton, PA Army Reserve Plant Chamberlain
Manufacturing
Corporation
Sunflower De Soto, KS Excess facilities under environmental
remediation
Alliant Techsystems, Inc.
Twin Cities New Brighton, MN Inactive-standby facilities Alliant Techsystems, Inc.
Volunteer Chattanooga, TN Excess facilities ICI Americas, Inc.

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Table G-2, Army Reserve and Inactive Standby Plants' Mission and Activity
PLANT STATUS MISSION CURRENT ACTIVITY
Longhorn and
Louisiana
Army Reserve Manufacture large caliber
metal parts
Maintain critical, essential metal parts
manufacturing capability
Mississippi Army Reserve Manufacture grenade metal
parts and load, assemble,
and pack 155mm projectile
Facility contractor marketing
alternative commercial and
Government reutilization of assets
while maintaining readiness
Riverbank Army Reserve Produce cartridge cases and
grenade metal parts
Facility use contract allows production
of competitively obtained commercial
and defense metal parts orders
Scranton Army Reserve Manufacture ammunition
metal parts
Facility use contract allows production
of competitively obtained commercial
and defense metal parts orders
Kansas Inactive Standby Third party and facility use
contract for load, assemble,
and pack efforts
Current production under third party
contracts and facility use contract
manufacturing
Ravenna Inactive Standby Excess for production Storage of industrial stocks. Ongoing
environmental remediation.
Twin Cities Inactive Standby Excess for production Ongoing environmental remediation.
Part of facility is used by present
contractor for competitively obtained
defense contracts
Badger Excess site None Available for ARMS13
Cornhusker Excess site None Available for ARMS
Indiana Excess site None Available for ARMS
Joliet Excess site None Available for ARMS
Sunflower Excess site None Available for ARMS
Volunteer Excess site None Available for ARMS
13
The Armament Retooling and Manufacturing Support (ARMS) act passed by Congress in 1992 allows
businesses to use "idle" capacity and capability at AAPs including land, buildings, equipment, utilities,
communications and transportation.

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Booz·Allen & Hamilton H-1 May 14, 1999
Appendix H: AAP Detailed Cost Estimate

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AAP Status Quo Cost Summary
(AAP retain CAS functions)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008
1.0 Investment Cost
1.1 Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
1.2 System Interface Design $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Constant) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Inflated) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Investment Costs (Discounted) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.1 Recurring Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2a DCMC Personnel (Addt'l for Actives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2b DCMC Personnel (Addt'l for Inactives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2c AAP CAS Personnel (Actives) $62,136 $6,214 $6,214 $6,214 $6,214 $6,214 $6,214 $6,214 $6,214 $6,214
2.2d AAP CAS Personnel (Inactives) $3,449 $375 $375 $375 $375 $375 $375 $375 $274 $274
Total O&S Costs (Constant) $65,585 $6,589 $6,589 $6,589 $6,589 $6,589 $6,589 $6,589 $6,488 $6,488
Total O&S Costs (Inflated) $74,453 $6,740 $6,895 $7,054 $7,216 $7,382 $7,552 $7,726 $7,782 $7,961
Total O&S Costs (Discounted) $54,301 $6,360 $6,139 $5,926 $5,720 $5,521 $5,329 $5,144 $4,889 $4,719
Total Investment and O&S Costs (Constant) $65,585 $6,589 $6,589 $6,589 $6,589 $6,589 $6,589 $6,589 $6,488 $6,488
Total Investment and O&S Costs (Inflated) $74,453 $6,740 $6,895 $7,054 $7,216 $7,382 $7,552 $7,726 $7,782 $7,961
Total Investment and O&S Costs (Discounted) $54,301 $6,360 $6,139 $5,926 $5,720 $5,521 $5,329 $5,144 $4,889 $4,719

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AAP Status Quo Risk Summary
Statistics: Value
Trials 1,000
Mean $56,038
Median $55,920
Mode ---
Skewness 0.21
Kurtosis 2.60
Range Width $16,642
Frequency Chart
.000
.006
.013
.019
.025
0
6.25
12.5
18.75
25
$47,500 $51,875 $56,250 $60,625 $65,000
Forecast: Alternative A-SQ Discounted Costs

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AAP Alternative A-1A Cost Summary
(AAP CAS functions transfer to DCMC, but personnel physically located at AAP facilities)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $267 $134 $134 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2a DCMC Personnel (Addt'l for Actives) $67,470 $6,747 $6,747 $6,747 $6,747 $6,747 $6,747 $6,747 $6,747 $6,747 $6,747
2.2b DCMC Personnel (Addt'l for Inactives) $5,266 $576 $576 $576 $576 $576 $576 $576 $411 $411 $411
2.2c AAP CAS Personnel (Actives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2d AAP CAS Personnel (Inactives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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AAP Alternative A-1A Risk Summary
Statistics: Value
Trials 1,000
Mean $62,029
Median $61,873
Mode ---
Skewness 0.12
Kurtosis 2.41
Range Width $15,572
Frequency Chart
.000
.009
.017
.026
.034
0
8.5
17
25.5
34
$52,500 $57,500 $62,500 $67,500 $72,500
Forecast: Alternative A-1A Discounted Costs

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AAP Alternative A-1B Cost Summary
(AAP CAS functions transfer to DCMC, and personnel physically relocate to a CAO)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $277 $138 $138 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2c AAP CAS Personnel (Actives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2.2d AAP CAS Personnel (Inactives) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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Alternative A-1B Risk Summary
Statistics: Value
Trials 1,000
Mean $57,300
Median $57,103
Mode ---
Skewness 0.16
Kurtosis 2.69
Range Width $23,094
Frequency Chart
.000
.011
.021
.032
.042
0
10.5
21
31.5
42
$45,000 $51,250 $57,500 $63,750 $70,000
1,000 Trials 1 Outlier
Forecast: Alternative A-1B Discounted Costs

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AAP Alternative A-2 Cost Summary
(Some AAP CAS functions transfer to DCMC, some stay with AAP; DCMC employees relocate to a CAO, AAP employees stay at AAP facilities)
Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1.0 Investment Cost
1.1 Training $124 $62 $62 $0 $0 $0 $0 $0 $0 $0 $0
2.0 O&S Cost
2.2c AAP CAS Personnel (Actives) $34,328 $3,433 $3,433 $3,433 $3,433 $3,433 $3,433 $3,433 $3,433 $3,433 $3,433
2.2d AAP CAS Personnel (Inactives) $1,902 $210 $210 $210 $210 $210 $210 $210 $145 $145 $145

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Alternative A-2 Risk Summary
Statistics: Value
Trials 1,000
Mean $53,050
Median $52,880
Mode ---
Skewness 0.22
Kurtosis 2.81
Range Width $22,956
Frequency Chart
.000
.008
.015
.023
.030
0
7.5
15
22.5
30
$42,500 $48,125 $53,750 $59,375 $65,000
Forecast: Alternative A-2 Discounted Costs

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1 Basis of Estimate, AAP
1.1 AAP Status Quo
1.1.1 Definition:
Alternative A-SQ is defined as leaving the CAS function as the responsibility of AAP.
With the Army Industrial Operations Command (IOC) in charge of CAS, AAP would continue to
operate in the same fashion.
There are no investment costs for the status quo alternative. Each active and inactive
ammo plant operates as it is currently operating so there is no investment training. Recurring
training is captured in element 2.1.
There are no investment costs for the status quo alternative. Each active and inactive
ammo plant operates as it is currently operating so there are no system interface costs. The
existing CAS information systems do not need to be upgraded since they will remain as-is in the
Status Quo.
Recurring training costs are included in the burdened labor rates in elements 2.2a – 2.2d.
1.1.5 Element 2.2a – DCMC Personnel (Additional for Actives)
There are no costs for this element under the status quo alternative since the active ammo
plants will staff their CAS with AAP FTEs. There are no additional DCMC costs.
1.1.6 Element 2.2b – DCMC Personnel (Additional for Inactive)
There are no costs for this element under the status quo alternative since the inactive
ammo plants will staff their CAS with AAP FTEs. There are no additional DCMC costs.
1.1.7 Element 2.2c – AAP CAS Personnel (Actives)
This element captures the AAP CAS FTEs at the active ammo plants. Based on interviews
with the IOC, the Lake City facility, and data collected by the IOC from the seven (Lone Star,
Radford, Holsten, Milan, Iowa, Lake City, and Hawthorne) active plants, we identified the CAS
personnel at each plant. To be considered “CAS,” the personnel had to spend greater than 50%
of their time in any of four CAS functions: contract administration, equipment management,
traffic management, or quality. We opted to use this methodology since each active and inactive
plant may only have one or two CAS FTEs at their respective locations. If any billet had greater
than 50% CAS responsibility, we counted the billet as a CAS FTE. Each facility was investigated
on a case-by-case basis. Using this methodology, we identified the following CAS FTEs at each
facility.

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Active Plant
Status Quo:
CAS AAP
FTEs at AAP
Lone Star 8.0
Radford 15.8
Holston 9.0
Milan 13.7
Iowa 16.0
Lake City 14.0
Hawthorne 5.0
Total 81.4**
Status Quo: Total CAS FTEs – Active Plants
This total number of FTEs (81.4) was then multiplied by the average active/inactive plant
salary ($46K) and the active/inactive plant “burden factor” (1.67). The “burden factor” is used to
capture other non-personnel costs such as rent, utility, supplies, and training. This cost estimate
was then applied from years 2000 through 2009 for an annual cost of $6.2M. For risk analysis, we
varied the plant salary between $40K and $52K and the burden factor between 1.65 and 1.8 to
address a degree of uncertainty.
1.1.8 Element 2.2d – AAP CAS Personnel (Inactive)
This element captures the AAP CAS FTEs at the inactive ammo plants. Based on
interviews with the IOC, the Sunflower facility, and data collected by the IOC from five (Kansas,
Longhorn/Louisiana, Mississippi, Riverbank, and Scranton) inactive plants, we identified the CAS
FTEs at each plant. We only considered these five plants from the list of inactive plants because
the IOC plans to engage in long-term relationships with them. The other inactive plants were
either going through environmental remediation only or were already closed. To be considered
“CAS,” the personnel had to spend greater than 50% of their time in any of five CAS functions:
contract administration, equipment management, facility management, production oversight, or
traffic management. We opted to use this methodology since each active and inactive plant may
only have one or two CAS FTEs at their respective locations. Each facility was investigated on a
case-by-case basis. Using this methodology, we identified the following CAS FTEs at each
facility.
*
indicates numbers have been rounded

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Inactive
Plant
Status Quo:
CAS AAP
FTEs at AAP
Kansas 1.3
Longhorn/
Louisiana 1.2
Mississippi 0.0
Riverbank 0.0
Scranton 2.4
Total SQ
FTEs:
4.9
Status Quo: Total CAS FTEs – Inactive Plants
This total number of FTEs (4.9) was then multiplied by the average active/inactive plant
salary ($46K) and the active/inactive plant “burden factor” (1.67). We multiplied by a “burden
factor” to capture other non-personnel costs such as rent, utility, supplies, and training. This cost
estimate was then applied from years 2000 through 2006 for an annual cost of $375K. From
2007 through 2009, we removed the Kansas facility CAS FTEs since, according to the IOC, that
facility will be closed by then. For risk analysis, we varied the plant salary between $40K and
$52K and the burden factor between 1.65 and 1.8 to address a degree of uncertainty.
1.2 AAP Alternative A-1A
1.2.1 Definition/Rationale:
Alternative A-1A is defined as AAP CAS FTEs becoming DCMC FTEs and physically
remaining at the AAP. Under this alternative, the current CAS personnel (81.4 at active, 4.9 at
inactive) “switch hats” and stay at their current location. The following charts show the number
of FTEs and their locations at both the active plants and the inactive plants. The number of FTEs
increases slightly under this alternative to account for rounding. If the CAS functions are moved
to DCMC and the personnel remain at the plants, we would need to round the FTEs up to whole
bodies. The active plant total becomes 82 personnel and the inactive total becomes 7 personnel.
Active
Plant
Alt A-1A
New DCMC
FTEs at AAP
Lone Star 8.0
Radford 16.0
Holston 9.0
Milan 14.0
Iowa 16.0
Lake City 14.0
Hawthorne 5.0
Total Alt A-1A FTEs: 82.0
Alt A-1A: Distribution of Total CAS FTEs – Active Plants

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Inactive
Plant
Alt A1A
New DCMC
FTEs at AAP
Kansas 2.0
Longhorn/
Louisiana 2.0
Mississippi 0.0
Riverbank 0.0
Scranton 3.0
Total Alt A-1A FTEs: 7.0
Alt A-1A: Distribution of Total CAS FTEs – Inactive Plants
There are minimal training investment costs for Alternative A-1A. When the cadre of
existing AAP personnel “switch hats” and become DCMC employees, they are already trained to
do CAS functions. However, when these AAP personnel become DCMC personnel, they may be
required to participate in some DCMC training. We assumed that the 89 (82+7) FTEs would
engage in one-time DCMC training of $3K. Total training cost of ~ $267K was allocated across
two fiscal years ($134K per year).
though the new transitioned DCMC personnel do not physically relocate, to take advantage of
DCMC information system synergy, the AAP CAS information systems and the DCMC CAS
information systems would have to communicate. Thus, this alternative must include costs for
this interface. Since the requirements for this interface are undefined, so are the costs. Based on
conversations with DCMC, we have assigned a cost of $1M to this. For risk analysis and to
address a degree of uncertainty, we varied this cost between $500K and $1.5M.
Since, existing AAP personnel transition to DCMC positions, there are no costs associated
with this cost element. As such recurring training costs are buried in the burdened labor rates in
elements 2.2a – 2.2b.
Under this alternative, the active AAP CAS FTEs become DCMC FTEs so this cost
element is calculated by taking the number of DCMC CAS FTEs under this alternative (82),
multiplying it by the average AAP CAS salary ($46K), and multiplying that by the DCMC burden
factor (1.8). (Since they are DCMC employees, we use the DCMC burden factor.) Because of
the higher DCMC burden factor and the additional FTE, costs under 2.2a in this alternative are
slightly higher than costs under 2.2c in the status quo. This cost estimate was then applied from
years 2000 through 2009. For risk analysis, we varied the plant salary between $40K and $52K to
address a degree of uncertainty.

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1.2.6 Element 2.2b – DCMC Personnel (Additional for Inactives)
Under this alternative, the inactive AAP CAS FTEs become DCMC FTEs. This cost
element is calculated by taking the number of DCMC CAS FTEs in this alternative (7),
multiplying by the average AAP CAS salary ($46K), and then multiplying by the DCMC burden
factor (1.8). (Since they are DCMC employees, we use the DCMC burden factor.) This cost
estimate was then applied from years 2000 through 2006. From 2007 through 2009, we removed
the Kansas facility CAS FTEs since, according to the IOC, the plant will be closed by then. For
risk analysis, we varied the plant salary between $40K and $52K to address a degree of
uncertainty.
There are no costs under this element for this alternative since the active CAS personnel
have all switched hats and become DCMC employees. The costs are now captured in element
2.2a.
1.2.8 Element 2.2d – AAP CAS Personnel (Inactives)
There are no costs under this element for this alternative since the inactive CAS personnel
have all switched hats and become DCMC employees. The costs are now captured in element
2.2b.
1.3 AAP Alternative A-1B
1.3.1 Definition/Rationale:
Alternative A-1B is defined as moving the CAS function out of AAP and into DCMC.
The AAP CAS personnel would become DCMC employees and those positions that can be will
be physically relocated to a DCMC Contract Administrative Office (CAO). Under this
alternative, the current CAS FTEs (81.4 at active, 4.9 at inactive) “switch hats”.
We first isolated the CAS FTEs into two categories: DCMC personnel that would
relocate and personnel that would not. Most of these people (except for two) were completely
assigned (100%) to a unique CAS function. As such, they were easily separated into people that
could relocate to a CAO and those who had to remain at the ammo plant. According to the IOC
and the active plants, the equipment management function and the quality assurance (QA)
function must stay at the plant. We made an assumption that one person at Radford and one
person at Milan could transfer their non-CAS functions (435 and 540 hours respectively) to other
AAP personnel located at these respective plants.
As shown by the chart below, 47 new DCMC FTEs had to stay at the ammo plants.
However, 37 FTEs could physically relocate to a CAO. Like Alternative A-1A, the DCMC staff
that stay at the ammo plants needed to be rounded up to whole numbers. However, the DCMC
staff that relocate to the CAOs do not have to be rounded because they are co-located and sharing
of duties is feasible.
Of the CAS personnel relocated to a CAO, we assumed DCMC would eventually draw
down the AAP unique CAS staffing consistent with past operations. Based on discussions with
DCMC, a 10% annual reduction in CAS FTEs may be possible. For risk analysis purposes, we

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assumed that 20% is the highest reduction rate and the lowest reduction rate is 0%. For 2000-
2001, no change will occur for the number of new CAS DCMC FTEs (37). However, after 2001,
we calculated an annual 10% reduction of new CAS DCMC FTEs.
The rationale behind this assumption is to capture economies of scale associated with the
consolidation with DCMC. See the qualitative section for expected impacts on quality.
Active
Plant
Alt A1B
New DCMC
FTEs at AAP
Alt A1B:
New DCMC
FTEs at
CAO
Lone Star 4.0 4.0
Radford 10.0 6.0
Holston 3.0 6.5
Milan 10.0 4.6
Iowa 9.0 7.0
Lake City 11.0 4.0
Hawthorne 0.0 5.0
Total 47.0
Total Alt A1B
37.0
*
FTES: 84.0
Alt A-1B: Distribution of CAS FTEs – Active Plants
Like the active plants, the inactive AAP CAS personnel become DCMC personnel and
those positions that can physically relocate, to a CAO. We first isolated the CAS personnel into
two categories: DCMC personnel that would relocate and personnel that would not. We
reviewed each plant on a case-by-case basis and determined that slightly more than 50% (4.3
FTEs) could relocate to a CAO. The others would have to remain at the ammo plant. According
to the IOC and the inactive plants, only the equipment management function must stay at the
plant.
As shown by the chart below, 4 new DCMC FTEs had to stay at the ammo plants.
However, 4.3 FTEs could physically relocate to a CAO. Like Alternative A-1A, the DCMC staff
that stay at the ammo plants need to be rounded up to whole numbers. However, the DCMC
staff that relocate to the CAOs do not have to be rounded because co-location at a CAO allows
for sharing of duties with existing DCMC staff.
Like the active plants, a 10% annual reduction in CAS FTEs may be possible. For risk
analysis purposes, we assumed that 20% is the highest reduction rate and the lowest reduction
rate is 0%. For 2000-2001, no change will occur for the number of new CAS DCMC FTEs (4.3).
However, after 2001, we calculated an annual 10% reduction of new CAS DCMC FTEs.
*

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Inactive
Plant
Alt A1B
New DCMC
FTEs at AAP
Alt A1B:
New DCMC
FTEs at
CAO
Kansas 1.0 1.1
Longhorn/
Louisiana 2.0 0.9
Mississippi 0.0 0.0
Riverbank 0.0 0.0
Scranton 1.0 2.2
Total 4.0
Total Alt A1B
4.3*
FTEs: 8.3
Alt A- 1B: Distribution of CAS FTEs – Inactive Plants
There are minimal training investment costs for Alternative A-1B. When the cadre of
required to participate in some DCMC training. We assumed that the 92.3 (84+8.3) FTEs would
engage in one-time DCMC training of $3K ~ $277K was allocated across two fiscal years ($134K
per year).
information system synergy, the AAP CAS information systems and the DCMC CAS information
systems would have to communicate. Thus, this alternative must include costs for this interface.
Since the requirements for this interface are undefined, so are the costs. Based on the
conversations with DCMC, we have assigned a cost of $1M to this. For risk analysis and to
address a degree of uncertainty, we varied this cost between $500K and $1.5M.
For years 2000 and 2001, existing personnel assume the DCMC positions so recurring
training costs are buried in the burdened labor rates in element 2.2a – 2.2b. But, from 2002
through 2009, FTEs are moved from the ammo plants to a CAO. As AAP FTEs are absorbed
into DCMC, those transferred FTEs as well as new DCMC staff will require training in
ammunition specific topics. As such recurring training costs increase for DCMC in the outyears
to maintain ammunition/explosives expertise. This calculation is a function of a small number of
DCMC FTEs being required to take one additional class per year.
*

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To calculate this cost element, we took the number of DCMC CAS FTEs identified in this
alternative (84), multiplied it by the average AAP CAS salary ($46K), and multiplied it by the
DCMC burden factor (1.8). (Since they are DCMC employees, we use the DCMC burden
factor.) This cost estimate is in years 2000 and 2001. However, from years 2002 through 2009,
we decreased the number of DCMC FTEs at the CAO by 10% per year calculating a range of 0 –
20% for risk analysis purposes. The number of DCMC FTEs at the ammo plants (47) stays
constant. For risk analysis, we varied the plant salary between $40K and $52K to address a
degree of uncertainty.
To calculate this cost element, we took the number of DCMC CAS FTEs identified in this
alternative (8.3), multiplied it by the average AAP CAS salary ($46K), and multiplied it by the
20% for risk analysis purposes. The number of DCMC FTEs at the ammo plants (4) stays
constant. For risk analysis, we varied the plant salary between $40K and $52K since this is
unknown.
There are no costs under this element for this alternative since the active CAS personnel
have switched hats and become DCMC employees. The costs are now captured in element 2.2a.
There are no costs under this element for this alternative since the inactive CAS personnel
1.4 Alternative A-2
1.4.1 Definition:
Alternative A-2 is defined as some functions being delegated to DCMC and other CAS
functions remaining with the AAP. Under this alternative, the DCMC CAS FTEs (37 at active,
4.3 at inactive) “switch hats” and relocate to a DCMC CAO. Those that have to stay at the
ammo plants remain Army employees.
Some of the active plant AAP CAS personnel become DCMC personnel and physically
relocate, so we first isolated the CAS personnel into two categories: DCMC personnel that would
relocate and personnel that would not. Most of these people (except for two) were completely
assigned (100%) to a unique CAS function. As such, they were easily separated into people that
could relocate to a CAO and those who had to remain at the ammo plant. According to the IOC
and the active plants, the equipment management function and the quality assurance (QA)
function must stay at the plant. We made an assumption that one person’s 435 non-CAS hours at
Radford and one person’s 540 hours at Milan could be reallocated to AAP personnel located at
these respective plants.

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As shown by the chart below, 45 CAS FTEs remained Army employees and stayed at the
ammo plants. However, 37 FTEs could physically relocate to a CAO.
If the CAS FTEs are relocated to a CAO, DCMC would eventually draw down the AAP
unique CAS staffing consistent with past operations. Based on discussions with DCMC, a 10%
annual reduction in CAS FTEs may be possible. For risk analysis purposes, we assumed that 20%
is the highest reduction rate and the lowest reduction rate is 0%. For 2000-2001, no change will
occur for the number of new CAS DCMC FTEs (37). However, after 2001, there will be an
annual 10% reduction of new CAS DCMC FTEs. The rationale behind this assumption is to
capture economies of scale and professional efficiencies associated with the CAS consolidation
with DCMC. See the qualitative section for expected impacts on quality.
Active
Plant
Alt A-2:
AAP
FTEs at
AAP
Alt A-2:
New DCMC
FTEs at
CAO
Lone Star 4.0 4.0
Radford 10.0 6.0
Holston 2.5 6.5
Milan 9.4 4.6
Iowa 9.0 7.0
Lake City 10.0 4.0
Hawthorne 0.0 5.0
Total 45
*
Total Alt A-2
37.0*
FTEs: 82
Alt A-2: Distribution of CAS FTEs – Active Plants
Like the active plants, some of the inactive plant AAP CAS personnel become DCMC
personnel and physically relocate, so we first isolated the CAS personnel into two categories:
DCMC personnel that would relocate and personnel that would not. We reviewed each plant on
a case-by-case basis and determined that slightly less than 50% (4.3 FTEs) could relocate to a
CAO. The other FTEs would stay with the Army. According to the IOC and the inactive plants,
only the equipment management function must stay at the plant.
As shown by the chart below, 4 FTEs remain with the Army while 4.3 FTEs could
physically relocate to a CAO. Like the Status Quo, the Army staff that stay at the ammo plants
could easily continue to divide their time into CAS and non-CAS functions so they don’t have to
be rounded. Similarly, the DCMC staff that relocate to the CAOs do not have to be rounded
because they are co-located and sharing of duties is feasible.
Like the active plants, a 10% annual reduction in CAS FTEs may be possible. For risk
analysis purposes, we assumed that 20% is the highest reduction rate and the lowest reduction
rate is 0%. For 2000-2001, no change will occur for the number of new CAS DCMC FTEs (4.3).
However, after 2001,we calculated an annual 10% reduction of new CAS DCMC FTEs.
*

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Inactive
Plant
Alt A-2:
AAP
FTEs at AAP
Alt A-2:
New DCMC
FTEs at
CAO
Kansas 0.9 1.1
Longhorn/
Louisiana 1.1 0.9
Mississippi 0.0 0.0
Riverbank 0.0 0.0
Scranton 0.8 2.2
Total 2.8
Total Alt A-2
4.3
FTEs: 7.0
Alternative A-2: Distribution CAS FTEs-- Inactive Plants
There are minimal training investment costs for Alternative A-2. When the cadre of
required to participate in some DCMC training. We assumed that the 41.3 (37+4.3) FTEs would
engage in one-time DCMC training of $3K ~ $124K which we allocated across two fiscal years
($62K per year).
There are some system interface costs that need to be captured in this alternative. The
AAP CAS information systems and the DCMC CAS information systems will have to
communicate. Thus, this alternative must include costs for this interface. Since the requirements
for this interface are undefined, so are the costs. Based on conversations with DCMC, we have
assigned a cost of $1M to this. For risk analysis and to address a degree of uncertainty, we varied
this cost between $500K and $1.5M.
For years 2000 and 2001, existing personnel assume the DCMC positions so recurring
training costs are buried in the burdened labor rates in element 2.2a – 2.2d. But, from 2002
through 2009, FTEs are moved from the ammo plants to a CAO. As AAP FTEs are absorbed
into DCMC, those transferred FTEs as well as new DCMC staff will require training in
ammunition specific topics. As such recurring training costs increase for DCMC in the outyears
to maintain ammunition/explosives expertise. This calculation is a function of a small number of
DCMC FTEs being required to take one additional class per year.
To calculate this cost element, we took the number of DCMC CAS FTEs as identified in
this alternative (37), multiplied by the average AAP CAS salary ($46K), and multiplied by the

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20% for risk analysis purposes. For risk analysis, we varied the plant salary between $40K and
$52K to address a degree of uncertainty.
To calculate this cost element, we took the number of DCMC CAS FTEs as identified in
this alternative (4.3), multiplied it by the average AAP CAS salary ($46K), and multiplied it by the
20% for risk analysis purposes. For risk analysis, we varied the plant salary between $40K and
$52K to address a degree of uncertainty.
Unlike alternative A-1B, there are costs under this element since some of the active CAS
personnel remain AAP employees. This total number of AAP FTEs (45) was multiplied by the
average active/inactive plant salary ($46K) and the active/inactive plant “burden factor” (1.67).
This cost estimate was then applied from years 2000 through 2009. For risk analysis, we varied
the plant salary between $40K and $52K and the burden factor between 1.65 and 1.8 to address a
degree of uncertainty.
Like element 2.2c, 2.7 FTEs remain AAP billets. This number of CAS FTEs was then
multiplied by the average AAP CAS salary ($46K), and then multiplied by the AAP burden factor
(1.67). (Since they remain AAP employees, we use the AAP burden factor.) From 2007 through
2009, we removed the Kansas facility non-CAS FTEs since, according to the IOC, they will be
closed by then. For risk analysis, we varied the plant salary between $40K and $52K and the
burden factor between 1.65 and 1.8 to address a degree of uncertainty.
.

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Booz·Allen & Hamilton I-1 May 14, 1999
APPENDIX I
DEFINITIONS

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Appendix I - Definitions
Federally Funded Research and Development Center (FFRDC) were first established after
WWII. There are three types of FFRDCs:
• Study and Analysis Centers - Seven centers provide objective evaluation of complex issues
• Engineering and Integration Centers - Two centers provide engineering and technical support
for DoD research and engineering centers
• Research and Development Centers - leverage basic research and advanced development
programs in support of DoD material development
There are two university affiliated FFRDCs:
• Massachusetts Institute of Technology, Lincoln Laboratories
• Carnegie Mellon, Software Engineering Institute
University Affiliated Research Centers - The DoD sponsors six not-for-profit, private and State
University integrated laboratories, identified below. The relationship between the UARC and DoD
sponsoring agency is long-term and strategic. Each UARC receives annual sole-source funding in
excess of $2 million to establish and maintain essential research, core development and
engineering capabilities. They operate in the public interest, free from conflicts of interests.
Institution Description
Johns Hopkins University Applied Physics
Laboratory
• Invented the concept of satellite
navigation that led to modern global
positioning capabilities
• Played a pivotal role in inventing,
developing and prototyping the Navy's
Cooperative Engagement Capability
Penn State University Applied Research
Laboratory.
• Responsible for the design of 21
advanced propulsors and
hydrodynamics devices for Navy surface
ships, submarines and torpedoes
• Conceptualized and demonstrated the
key enabling technologies and
supporting research for advanced ship
self-defense decoys
The University of Washington Applied
Physics Laboratory
• Solved the torpedo influence exploder
problems
• Currently directing research at
understanding the physics of ocean
processes to better predict the
performance of underwater systems
The University of Texas Applied Research
Laboratory
• Developed the ground station
equipment used to track TRANSIT

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Institution Description
(navigation) satellites
• Building the prototype of the MAXUS
sonar that will replace mine avoidance
sonar on attack submarines
Utah State University Space Dynamics
Laboratory
• Designed and built the Midcourse Space
Experiment's Spirit III telescoped
infrared sensor and functionally
• Demonstrated the feasibility of a Space-
based Infrared low-earth-orbit
surveillance concept
The Georgia Tech Research Institute • Designed and constructed the world's
largest compact antenna test range for
the Army

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