Army Cost Benefit Analysis A Case Study Battle Assembly Travel Reimbursement Developed based on information provided by Mr Mario F Wozniak Chief, Reserve Personnel Army (RPA), Budget Division US Army Reserve Command G8 Author: Mr William T Huddleston, MSOR, MSME Army Cost Benefit Analysis Battle Assembly Travel Reimbursement A Case Study Terminal Learning Objective • Task: Perform Army Cost Benefit Analysis • Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: with at least 80% accuracy: • Review the Army Step Cost Benefit Analysis process • Apply Cost Benefit Analysis to the Battle Assembly case © Author: William T Huddleston, MSOR, MSME Government Management Institute Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Army Reserve Command Overview Army Reserve Command Leadership A 3- star General leads the US Army Reserve Command and holds the following two titles: Chief, Army Reserve (CAR): Reports to Chief of Staff of Army; represents Army Reserve in policy and planning discussions with Army, Department of Defense and Congress Commanding General (CG) of the US Army Reserve Command (USARC): Reports to Army Forces Command; responsible for staffing, training and readiness of most Army Reserve units in continental US and Puerto Rico Army Reserve Command Mission Provide trained, equipped, and ready Soldiers and cohesive units to meet the global requirements across the full spectrum of operations The Army Reserve is a key element in The Army multicomponent unit force, training with Active and National Guard units to ensure all three components work as a fully integrated team Responsibilities •Operational tasks; training, equipping, managing, supporting, mobilizing, retaining Soldiers •Troop Program Unit (TPU) Soldiers; Commands, controls, supports Army Reserve troop units CONUS Exception: Psychological Operations and Civil Affairs units •Ensures readiness of forces; prepares over 1,700 units to mobilize and deploy to wartime theater Army Soldier Profile (FY09) 1,112,703 Soldiers Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Travel reimbursement is an existing issue within the ARC “Soldier reimbursement of travel expenses to a Battle Assembly (BA)” BA consist of monthly drills; soldiers practice military skills to maintain individual and unit readiness in case of mobilization and deployment Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Overview Request initiated by US Army Reserve Command to: Extend National Defense Authorization Act (NDAA) to: • Authorize travel reimbursement for “specified group” of Soldiers traveling to Battle Assembly outside normal commuting distance (>150 miles) especially; - Soldiers with critical Military Occupation Specialties - Soldiers affected by Base Realignment and Closure (BRAC) - Units with designated leader shortages Battle Assembly Training Case Study Instructor’s Support Material Battle Assembly Training Instructor’s Support Material • Length Time: 4h – Briefing 15-20 min, break out in teams to prepare each of the points average 10 per point area, presentation and discussion average 15 per point, wrap up 15-20 • Process – – – – Introduce the case Break the class into groups of Each group needs to prepare material for presentation results Use the excel templates as applicable • Presentation – Discuss findings with participants and agree on main points to ensure that they are on the right truck – Introduce support for each point after students’ presentation Battle Assembly Training Instructor’s Support Material Objectives: • Apply the CBA and by using it: • bring out the issues at hand • think though possible alternatives and support • Point to the: - Ranking process, and - Weight sensitivity since these are the key areas influencing the decision - Realize the need for support for a cost informed decision Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Define and Scope the Problem / Opportunity ARC soldiers are adversely impacted by having to pay travel costs to attend Battle Assembly Compare costs and benefits of extending travel reimbursement to ARC Soldiers traveling to BA Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Formulate Assumptions and Constraints - Current law does not allow for reimbursement of Soldier travel to Battle Assembly - Limit travel reimbursement to soldiers traveling greater than 150 miles to BA - Estimate 50,000 Soldiers travelling to BAs are not reimbursed - 24,000 of the 50,000 Soldiers have critical skills positions - Soldiers spend average $1,500 annually traveling to BAs - ARC Soldier attrition rate = 20% - Travel reimbursement can reduce ARC attrition by 5% - AR staff level = 205,000 Soldiers Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Formulate Assumptions and Constraints - Economic conditions, Soldier promotions as well as BRAC increase travel distance to Battle Assembly - 5,000 AR Soldiers effected by BRAC - 2,500 Soldiers impacted by BRAC have critical skills - Annual training for new recruits averages $75,000 - Operational Readiness is extremely important - Soldier morale very important - ARFORGEN enhancement is very important - Not all AR Soldiers can be reimbursed for travel to BA Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Formulate Assumptions and Constraints - Calculate costs for year and 10 years - Use 2% inflation rate Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Define Alternative Courses of Action No travel reimbursement to Battle Assembly (Status Quo) Reimburse all Soldiers travelling to Battle Assembly greater than 150 miles Reimburse only critically needed Soldiers and Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles Reimburse only Soldiers impacted by BRAC travelling to Battle Assembly greater than 150 miles Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Develop Cost Estimate for each Course of Action (COA) Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Develop Cost Estimates For Alternatives COST Travel Reimbursement Cost COA #1 No travel reimbursement (Status Quo) COA #2 Reimburse all Soldiers travelling >150 miles COA #3 COA #4 Reimburse Reimburse only Critical BRAC Soldiers Soldiers and travelling >150 BRAC travelling miles >150 miles QUANTIFIABLE year $0 $75M $43M $8M 10 years $0 $821M $476M $82M NON QUANTIFIABLE Public Image Operational Readiness Morale Army Cost Benefit Analysis Battle Assembly Travel Reimbursement • Step Identify Quantifiable and Non-quantifiable Benefits • The primary benefit is reduced attrition • Soldiers lost through attrition must be replaced, increasing training costs COA #12 Reimburse all AR soldiers = 205,000 Training cost 75,000 per soldier annually Reduced Attrition rate = 0.5% Annual training Savings # AR Soldiers travel > 150mi = 50,000 Avg Travel Reimbursement Cost = $1,500 total annual travel reimburse cost Inflation 2% per year 205,000 soldiers 75,000 dollars 250 soldiers -18,750,000 training dollars 50,000 soldiers 1,500 dollars 75,000,000 travel dollars COA #3 Reimburse only Critically skilled And BRAC AR soldiers = 205,000 Training cost 75,000 per soldier annually Reduced Attrition rate = 0.5% Annual training Savings # AR Skilled Soldiers travel > 150mi = 24,000 # BRAC Soldiers travel > 150mi = 5000 Avg Travel Reimbursement Cost = $1,500 total annual travel reimburse cost Inflation 2% per year 205,000 soldiers 75,000 dollars 145 soldiers -10,875,000 training dollars 24,000 soldiers 5,000 soldiers 1,500 dollars 43,500,000 travel dollars COA #4 Reimburse BRAC only AR soldiers = 205,000 Training cost 75,000 per soldier annually Reduced Attrition rate = 0.5% Annual training Savings # BRAC Soldiers travel > 150mi = 5000 Avg Travel Reimbursement Cost = $1,500 total annual travel reimburse cost Inflation 2% per year 205,000 soldiers 75,000 dollars 25 soldiers -1,875,000 training dollars 5,000 soldiers 1,500 soldiers 7,500,000 dollars Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Identify Quantifiable and Non-quantifiable Benefits BENEFIT Training Cost Savings QUANTIFIABLE year 10 years NON QUANTIFIABLE COA #1 Status quo: No Reimbursement for travelling >150 miles None None COA #2 Reimburse all Soldiers travelling >150 miles COA #3 Reimburse critical and BRAC Soldiers travelling >150 miles COA #4 Reimburse only BRAC Soldiers travelling >150 miles $19M $205M $11M $119M $2M $21M • Increased Operational Readiness • Enhance ARFORGEN • Increased Soldier morale • Increased Operational Readiness • Enhance ARFORGEN • Increased Soldier morale • Increased Operational Readiness • Enhance ARFORGEN • Increased Soldier morale Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Define Alternative Selection Criteria - Cost of travel reimbursement year Cost of Travel reimbursement 10 years Training Cost Savings year Training Cost Savings 10 years Soldier morale, value perception, and personal finance stability - Improved Operational Readiness and enhancement to ARFORGEN Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Compare Alternatives Decision Matrix COA #1 COA #2 No Travel Reimbursement Criteria COA #3 Reimburse All Travel Reimburse Cost (+) yr 10% 0.0 0.4 75.0 0.1 43.5 0.2 7.5 0.3 Travel Reimburse Cost (+) 10 yrs 20% 0.0 0.8 821.2 0.2 476.3 0.4 82.1 0.6 Training Cost Savings(-) yr 10% 0.0 0.1 -18.8 0.4 -10.9 0.3 -1.9 0.2 Training cost Savings(-) 10 yrs 20% 0.0 0.2 -205.3 0.8 -119.1 0.6 -20.5 0.4 Morale / Good Will 20% 0.2 0.8 0.6 0.4 Operational Readiness 20% 0.2 0.8 0.6 0.4 Best Acceptable Marginal Worst Data Reimburse BRAC only Data Rankings Rank Score Reimburse Critical and BRAC Weight 100% Rank Score Data COA #4 Rank Score Data Rank Score 0 0 0 0 0 0 0 0 1.9 3.1 2.7 2.3 Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Report Results and Recommendations Executive Summary The Army Reserve is considering reimbursing AR soldiers that must travel greater than 150 miles to Battle Assembly Four Courses of Action (COAs) were developed to determine if travel reimbursement to BA is feasible All COAs require additional resources as travel costs are only partially offset by training cost savings Recommendation: Implement COA #2: Reimburse all AR Soldiers traveling greater than 150 miles to Battle Assembly •Cost to implement COA 2: •Travel Cost s: •Training Cost Savings: •Net ARC Costs: FY12 FY 12 FY12 $75M $18.8M $ 56.2M FY12-21 FY12-21 FY12-21 $821.2M $205.3M $615.9M ... Readiness ARFORGEN enhancement Army Cost Benefit Analysis Battle Assembly Travel Reimbursement Case Study Overview Cost Benefit Analysis (CBA) Review Army Cost Benefit Analysis Battle Assembly Travel... the Army Step Cost Benefit Analysis process • Apply Cost Benefit Analysis to the Battle Assembly case © Author: William T Huddleston, MSOR, MSME Government Management Institute Army Cost Benefit. . .Army Cost Benefit Analysis Battle Assembly Travel Reimbursement A Case Study Terminal Learning Objective • Task: Perform Army Cost Benefit Analysis • Condition: You