Uncovering the Mysteries of MoD Support Costs
Neil Morrill - Dstl
Steve Robinson – Galorath
19 March 2009
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Dstl key facts• Part of the Ministry of Defence
• Formed in 2001 when remainder of the Defence Evaluation and Research Agency was reconstituted as a Government-owned company (QinetiQ) in preparation for privatisation
• Dstl’s mission:
Creating the winning edge for UK Forces and Government through the best use of science and technology
• 3500 staff (including 100 military)
• Operates as a Government Trading Fund (ie 100% ‘contract’funded), turnover £380 million
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Dstl’s role• Trusted in-house analysis and advice
• Research– in particularly sensitive areas
– or where deep understanding needed for defence purposes
• Knowledge integration– based on global science and technology
• Focus for international research collaboration– government to government
• Dstl does not undertake commercial contracts unless directed to do so by MOD
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Scope of Analysis within Dstl
PolicyPolicy
OperationsOperations
ProcurementProcurement
“To support MOD in making the best policy,procurement and operational decisions”
~ 50%
~ 25%
~ 25%
Approximate balance of analytical effort
(people and money)
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Personnel
Scope of operational analysis in Dstl
Overall force
structureLogistics & support
Operations & training
Capability Balance-of-Investment
Equipment acquisition
Policy
Strategic analysis
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Manning, Training and Costs (MTC) Team• Formed in April 2007 from the Manning Team and Cost
Analysis team.
• Expanded to include training to enable us to provide analytical support across more of the ‘other’ Defence Lines of Development (DLOD).
• Role: – Develop the tools, techniques and networks to provide scientificadvice to support high level manpower and training decisions.
– To provide cost estimates, analytical support, advice and guidance to customers, and to provide/develop the tools, techniques and processes to do so.
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
What is a BOI?• Balance of Investment: The way in which resources are
allocated to competing demands to most cost-effectivelyachieve one or more desired capabilities
Examples:
• between different systems for countering enemy armour– e.g. infantry-deployed anti-tank weapons, tanks, artillery systems, mines,
fixed-wing aircraft, attack helicopters
• between alternative ways of improving personnel retention– e.g. improving pay, improving living accommodation, long-service
incentives, etc
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
General BOI Methodology
ScenariosScenariosScenariosScenariosScenarios and
CampaignsScenarios and
Campaigns
Scenario Characterisation
Scenario Characterisation
Capability Requirements
Capability Requirements
System OptionsSystem OptionsCost-Effectiveness
AnalysisCost-Effectiveness
Analysis
Cost Effective Force Mix(es)Cost Effective Force Mix(es)
CostsCosts
Additional Requirements
Additional RequirementsTools:
Mathematical Programmes,
Exhaustive methods etc
Tools:
Mathematical Programmes,
Exhaustive methods etc
EAC or NPV
Fixed cost and variable cost
EAC or NPV
Fixed cost and variable cost
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Support Cost Study
• Aim – To understand if readily available data sources provide adequate information to conduct BoI analysis
• Approach – Engage with relevant Integrated Project Team’s and stakeholders to obtain additional understanding and information
• Output – Conclusions and Recommendations based on findings of analysis
• Case Study – Independent cost analysis of Future Lynx using SEER-H
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Costs in Then Year (RAB)
Costs in Cash
Through Life Cost ProcessOther DLOD’s
Later Year Costs
(Beyond Yr10)
BoI Capability
Costs Through Life
Planning Round
Equipment
ProcurementAssumptions
Multi Eqpt IPTSingle Eqpt IPT
High Level
Support Costs
OutputPlatform
10 Yr Detailed
Support Costs
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Overall AnalysisSupport Costs by Equipment/Platform
AMR
AAM
BCIP
Bulld
og
Chi
nook
Cut
lass
GM
LRS
GSV
Her
cule
s
JCA
Lynx
Pum
a
Rea
per
Sent
ry E
3D
Soot
hsay
er
Spea
rfish
Stin
gray
Traf
alga
r
Type
23
Type
45
Typh
oon
VC10
War
rior
Wat
chke
eper
Percentage Allocation of PR09 Support Costs to Cost Record Categories
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%AM
RAA
M
BCIP
Bulld
og
Chi
nook
Cut
lass
GM
LRS
GSV
Her
cule
s
JCA
Lynx
Pum
a
Rea
per
Sent
ry E
3D
Soot
hsay
er
Spea
rfish
Stin
gray
Traf
alga
r
Type
23
Type
45
Typh
oon
VC10
War
rior
Wat
chke
eper
Not Mapped
Upkeep
Upgrade
Update
Procurement
Other
Fuels
Capital Spares
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Lynx - Case Study
Establish what proportion is covered in the Equipment Support Plan (ESP)
• Discussions with Finance Branches of stakeholder organisations
– Data was not readily available
• Capitation Rates for existing Lynx aircraft– Excluded cost of money and depreciation– Based on assumptions made ESP covers between 22% and
44% – Operating cost of bases, fuel, training, operators (crew)
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Future Lynx – SEER Case Study
• Equipment Breakdown consisting of:– Airframe– Hydraulic System– Fuel System– Landing Gear – Electrical System – Propulsion – Rotor System – Drive System – Flight Control – C3I – Navigation – Fire Control – Data Management – Weapon System
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Future Lynx – SEER Case Study
• SEER-H with the following assumptions:
– Life – 30 Yrs
– Number of Helos –Total number likely to be procured
– Utilisation – 1.5% to 3%
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Future Lynx – SEER Case Study
• Output from SEER-H– Support for procured aircraft:
• 50% probability - £2,900M• 80% probability - £5,500M
– Range of £100M - £185M per year through life
• Comparison between SEER-H and MoD Data– MoD data reasonable at the low to mid point of the SEER range
© Dstl 200925 March 2009 Dstl is part of the
Ministry of DefenceUNCLASSIFIED
Study Outcome
• Observations– New process implemented
during FY09/10
– For BoI studies, possible risk of double counting
– Using Lynx as an example, ESCoM covers between 22-44% of capability WLC
– Independent check with SEER-H shows support at the lower end of the predicted range
• Conclusions– Readily available data not
sufficient to provide cost information for BoI studies
– Stakeholder involvement required for detailed analysis
• Recommendations– Future iterations with new
candidate projects
– Independent WLC analysis