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These costs would include such items as the Squadron operating and sustainment costs, facilities costs associated with their operations and personnel related costs. The y-axis depict the amount and the x-axis depicts time. The line is horizontal at first, then rises, levels off then drops down again to a new horizontal which is above the original level. The first horizontal level is extended through the entire graph area. These areas meet in a diagonal line, showing overlap of the two costs.

The area between the extension of the original horizontal line and the cost lines rise, level off and drop is shaded and labelled " NGFC Project Costs". This area overlaps with the area under the final horizontal level of the line, which is titled " NGFC Increment". The relationship among the program, incremental and project costs is depicted in Figure 5 above.

The Contract level has not been depicted as contract costs would contribute to both project and incremental costs. Note also that Figure 5 is not intended to be to scale in terms of the relative sizes of program costs, project costs and incremental costs, and Figure 5 depicts positive incremental cost for illustrative purpose only. The Portfolio level includes the costs from all previous cost levels, and the addition of costs of other capabilities that indirectly contribute to the NGFC , based on sound judgment 8. Examples of these types of costs are the recruiting systems that provide basic training to future pilots, as well as surveillance and intelligence equipment that may compliment the effectiveness of the NGFC.

Each of these boundaries becomes important at critical times in the decision making process, as well as aspects of ongoing management. This is examined below and in more detail in section 4. The Life Cycle Costing process establishes a common and consistent approach to providing products to key decision makers and stakeholders. The process ensures that information provided for differing purposes can be reconciled to help ensure consistency in practice and reporting.

In this context, the products refer to what is provided to the final decision maker.

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These products are generally tailored for a non-expert audience and often form part of a suite of documents being provided to support decisions. These products would also directly support the approvals needed for decision points such as Contract, Project and Expenditure approvals.

This diagram is a three-dimensional cube having specific volumes associated with figures representing costs. The dimensions of the cube are time length , work breakdown structure height and Votes depth. The Time dimension length has many partitions and along the axis is labelled Year 1, just less than half-way is labelled year 10 and at the end, is labelled Useful life. The Votes dimension depth has three partitions, labelled Vote 10, Vote 5 and Vote 1. The Work Breakdown Structure dimension height has many partitions but none are labelled.

The document figure labelled " LCC for Programming" is associated with approximately half the cube year 1 to before year 10, all work breakdown structure and all votes. The document figure labelled " LCC for Useful Life Analysis" is associated the entire cube all years, all work breakdown structure and all votes. The following section outlines the specific milestones or decision points in the coming years that would require the use of the NGFC LCC. These are based on the existing federal government approval processes including Departmental decisions and approvals, Treasury Board and Cabinet approvals and Parliamentary approvals.

During the Development Phase the LCC Estimate would be progressively improved through the inclusion of more reliable information and greater certainty around a number of aspects of the project. The model would be routinely updated as new information becomes available. Leading up to decisions points the model would be independently reviewed to provide assurance to decision makers that the LCC Estimate is suitable given the stage of the program and the programs overall characteristics.

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Through the Acquisition Phase more and more actual data would be available, as well as better data on operating and sustainment costs. Through Project Definition and Implementation, greater focus would be on using the LCC project costs in support of project management and performance management approaches Annually the LCC Estimate would likely be reviewed and updated to support the improved understandings of project elements as well as supporting revisions to the operating and support costs to assist DND budgeting.

Prior to commencing the Definition Phase of a project, Treasury Board Project approval must be sought for a project of this magnitude 9. The scope, schedule and cost of the project must be outlined in a Project Brief as part of the submission to Treasury Board by the Minister of National Defence in seeking Expenditure Authority.

The specific costing information requirements include guidance that the costing analysis includes all life cycle costs The following paragraphs outline more specific direction on this costing analysis. The Project Approval approach recognizes that the degree of certainty increases as the project progresses. There are three broad levels of cost estimates that are used in this approval process 11 :.

As the project approaches the Definition stage, cost estimates would need to improve beyond the ROM estimates. Expenditure Authority for the Definition Phase would be sought for the first portion of the project at this first TB Submission. The Definition Phase clarifies the work to be done in Implementation Phase s to allow for the preparation of a substantive cost estimate to be developed for the Implementation Phase s.

In this initial Project Brief and submission, there would be substantive costs for this first portion of the project along with an indicative estimate of total project costs. In addition, the full amount of ongoing costs, over the timeframe of the NGFC Program, would be presented as information to TB Ministers along with a statement as to how incremental amounts relative to existing program costs were being funded e.

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As part of the Project Brief referenced above, the Minister of National Defence would also propose milestones at which the project would return to Treasury Board and when further Expenditure Authority would be sought. For the subsequent submissions e.

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This submission would include a revised Project Brief to support the request. The costing in the Project Brief would include updated project costs and would also be accompanied by updated NGFC incremental costs. If the project scope or costs have changed from what was approved at the Project Approval decision point, a Revised Project Approval decision must also be sought. To be effective, the LCC data presented to Treasury Board in the various submissions must represent the total Project and Incremental Costs necessary to deliver the endorsed Statement of Requirements. Depending on the contract length, the sustainment costs could also extend beyond the completion of the project through to the operations phase of the NGFC Program.

The primary purpose is to provide Parliament with an understanding of the progress of the NGFC and an update on the life cycle costs. Specifically the update should include all costs out to and including the program level. The span of years for the project reporting should include all estimated costs out to the disposal of all the NGFC as well as already incurred costs.

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  • The start of the horizontal axis is labelled "Conception", and the end of the horizontal axis is labelled "Disposal". The vertical axis is not labelled but has a specific segment labelled "Cost Uncertainty". The top and bottom of the Cost Uncertainty segment are the starting points of the two lines on the graph, which, from the bottom curve upward and from the top curve downward toward each other, finally meeting at a point that is directly above "disposal" on the timeline.

    The area between these two lines is a cone shape. Life Cycle Costing is fundamentally a forecasting activity and is therefore imprecise, uncertain and highly sensitive to many factors that may be difficult to quantify at the time when the LCC is developed. As a project matures, knowledge would increase as calculations are based on increasingly detailed and reliable data and assumptions would be tested and validated, leading to more certainty around Life Cycle Cost estimates. Government and the public often seek a higher degree of precision than can be justified with the information available.

    Care needs to be taken to both estimate the degree of uncertainty confidence level and to communicate this in a clear manner. Over the lifespan of the initiative, the uncertainties in the costing would diminish. For example, during the Development Phase, the uncertainty related to subsequent phases e.

    Acquisition and Sustainment or Operations or Disposal would remain relatively high, as represented by the far left side of Figure 7. As the Development phase continues and nears completion, some of the costs of the later phases would become more certain. However, there would continue to be significant uncertainty in the estimates related to Operations until there is actual experience in the Operations phase.

    The Canadian Air Force journal

    As the Operations phase continues, costs would be more certain, but even then some uncertainty would remain related to, for example, fluctuations in fuel costs or currencies. As a result of these refinements, decision makers and stakeholders would have increasing confidence in the costs presented as the program progresses. As an example of Framework evolution, within the Australia Defence Materiel Organization, the expectations of increasing levels of project knowledge are captured through the Project Maturity Score.

    The Project Maturity Score is derived from the study and analysis of seven key attributes of a project:. The Australian Defence Materiel Organizations expectation is that, as the project matures and passes through its internal and external reviews, knowledge and confidence in each area would increase. Each of these above attributes is scored on a range of 1 through 10 so that the maximum score is As illustrated in the Figure 8 below the projects score should increase over time.

    The horizontal axis, which indicates life cycle gates, is labelled using two rows of information. The vertical axis, which indicates benchmark project maturity scores is partitioned in bands as follows: 7 to 13, 14 to 20, 21 to 27, 28 to 34, 35 to 41, 42 to 48, 49 to 55, 56 to 62, 63 to 69 and At the Development phase of the project, little is known and the costs are highly uncertain. As the project progresses through the Acquisition, and Sustainment and Operations phases, more and more information is gathered creating more certainty in the LCC estimate.

    It should be clear that, as the NGFC Program progresses; there would be increased confidence in the estimate derived from increased confidence in the underlying data. The maturation of a cost model can also be explained by the maturation of the cost methods used starting with analogous data and completed by using engineering data, supported by actual contract costs.

    Figure 9 below is presented to provide the type of changes that might occur. Note that this table is highly illustrative and designed to convey the concepts discussed and should not be used to assess any aspect of the NGFC LCC Framework. This would manifest itself in reduced uncertainty around the baseline costs. This is illustrated in Figure 10 below. This diagram is a line graph showing three superimposed parabolic curves. The vertical axis of the graph is labelled "Probability of Cost", and the horizontal axis is labelled "Cost".

    The second parabolic curve, labelled "Initial Project Approval" is narrower, and taller than the first. The third parabolic curve, labelled "Final Project Approval" is the narrowest and tallest of all three. There is a label at the bottom of the graph which states "Illustration of increased confidence in costs, risk management and project maturity leads to reduced uncertainty.

    This figure is a sequence of six linked blocks with the caption "People and Organization". This second block leads to the third block, which is labelled "Develop Model" and then on to the fourth blocks "Data, Populate and Document model". The fourth block leads to the fifth block titled "Review, analyse and update", which leads to the final sixth block, "Interpret and report results", which leads back to the fifth Review, analyse and update and fourth Data, populate and document model blocks.

    A successful LCC Framework and approach requires many interrelated elements, including a team approach, recognition of the sensitivity of outputs to the level of detail and certainty around the cost and time inputs, and the recognition of the inherent limitations of the LCC techniques employed. The key outcomes are to provide relevant LCC information products, consistent with using reasonable data sources available at the time, to inform budgeting and financial based decisions.

    As stated previously, the NGFC principles are based on international leading practices, considering Government requirements where applicable. The Government direction summarized in the following sections has been based primarily on applicable Treasury Board policies and existing DND cost guidance. Treasury Board issues a range of policy instruments that are designed to establish mandatory requirements rules or voluntary best practices. There are three types of mandatory instruments policies, directives and standards and two voluntary instruments guidelines and tools.

    In terms of guidelines i.