January 18, 1995 This document provides guidance for the Cost and Operational Effectiveness Analysis (COEA) required for the Milestone I review of the Surface Combatant for the 21st Century (SC-21). In accordance with DoDI 5000.2, COEAs serve to evaluate the costs and benefits associated with alternative ways to address recognized defense needs. Milestone I COEAs typically are developed to facilitate program definition and, therefore, assess a broad range of alternative concepts. The SC-21 Milestone I COEA has three main purposes: (1) to examine the costs and benefits of reasonable alternatives that provide relevant warfighting capabilities satisfying identified mission requirements, (2) to provide the analytic basis for deriving the key system parameters that will be developed and tested during the demonstration and validation phase, and (3) to aid decision making among alternatives.
Scope of Analyses The COEA should provide information sufficient to understand the SC-21 characteristics that will be recommended for development at the MS 1 DAB. The analysis will quantify the advantages and disadvantages of the alternatives considered, and will specify the scenario factors, assumptions, and system characteristics that drive the results. Consistent with the JROC forwarding memorandum with the Mission Need Statement (MNS), analyses should be performed in two separate parts, with a review by the Conventional Systems Committee (CSC) after each part is completed. Part I of this effort should be a baseline analysis establishing the capability of the planned 2012 (FYDP extended) U.S. combat forces to accomplish each primary combat mission to which Navy surface .forces are expected to contribute in the context of the Defense Planning Guidance (DPG) against the DIA validated threat. This baseline analysis should be used to identify, and quantify to the extent feasible, overall mission deficiencies to which SC-21 could contribute. it should then estimate what naval surface forces requirements in the 21st Century will be and estimate the force level and mix of surface combatants within overall surface forces to address these deficiencies. Part II of the study should estimate the potential contributions of the SC-21 alternatives to overcome these combat mission deficiencies through suitable force-on-force analysis. The relative effectiveness of each alternative in joint scenarios must be assessed. For example, the COEA should evaluate the level of capability needed for naval expeditionary forces to provide TBMD and AAW area defense in a joint littoral environment (Part 1) and then how well each alternative meets these requirements (Part II). The analysis should derive preliminary procurement profiles for SC-21. These dates and acquisition profiles should be based on engineering assessments for service life, planned retirement profiles, and warfighting capabilities of DD-963s, DDG-993, and FFGs as well as surface combatant force level requirements. Analysis Plan The Navy will develop an analysis plan consistent with this COEA guidance that describes the proposed analytic approach, models, measures of effectiveness, threat, scenarios, joint service participation, and schedule for completing this COEA. This analysis plan should be presented to the COEA Oversight Board for review within four months following the Milestone 0 DAB. The Study Director should brief the COEA Analysis Plan to OSD immediately after the plan has been approved by ASN (RDA). Early and continuous OSD and Joint Staff involvement in this initial stage is essential to streamlining the acquisition process. SC-21 Alternatives The COEA should consider a broad range of surface combatant alternatives. it should avoid arbitrary restrictions in design characteristics and incorporate emerging technology where appropriate. As a minimum, the analysis should include examination of the alternatives listed below. A mix of these alternatives, or the development of additional concepts may evolve from the analysis to satisfy the mission deficiencies established in part I of the COEA. (1) Modernization and Service Life extension of Existing Forces. Integrate and upgrade the combat systems of the most capable existing ships to provide capabilities to meet specific force mission deficiencies. This alternative should be reviewed with each mod-repeat and new ship concept as a possible economic path to achieve equivalent force capability, or as a means of extending the development cycle of advanced systems to take advantage of new technologies. (2) Mod-repeat designs.
(3) New Ship Concepts. Examine a range of alternative hull, engineering, and combat system designs in a new class ship. This may be a single ship or a combination of several ships. One example of a multiple ship alternative is a family of modular combatants. These options should include:
With these alternatives, the option to delay delivery to achieve more advanced capabilities in the SC-21 and continue the DDG-51 Flight IIA as a gap filler may be explored. However, the risk, cost, and long-term force structure implications of a delayed introduction option must be compared with proceeding with an earlier operational capability. Solicitation of information from defense-wide commercial sources for developing technologies or use of COTS, and from shipyard prime contractors for design and production considerations is encouraged. Scenarios The SC-21 missions examined in the COEA will be consistent with the scenarios in the Defense Planning Guidance (DPG). The details of the scenarios will be coordinated with USD(P), the Joint Staff, PA&E, and DIA. Effectiveness The study must analyze the proposed alternatives in the context of the approved MNS Requirement. Threats in the DIA approved projected joint "Littoral Warfare Threat Environment", the operational scenarios, and joint force employment must be consistent with the assumptions set forth in the DPG scenarios and ongoing JCS joint warfare mission area assessments. Effectiveness contributions should be analyzed in the context of both joint task force and independent operations. The measures of effectiveness (MOEs) will be defined to measure operational capabilities and suitability (eg. reliability, maintainability, availability) of the alternatives across the warfare areas identified in the Mission Need Statement. The COEA MOEs should be developed so that they adequately show how the alternatives compare in meeting the functional objectives from the MNS and the mission deficiencies identified in part 1 of the COEA. The MOEs should be chosen taking into consideration the need to derive measurable parameters, and criteria that can be evaluated consistently throughout program development and testing to ensure that what is provided will offer sufficient military benefit to be worth the cost. A vulnerability assessment should be conducted to determine the total number of ships required to meet a specified level of operational effectiveness. This assessment should be consistent with the projected operational threat environments and threats and should include as minimum:
Costs A variety of cost measures should be provided, including the present value (discounted) estimates of the life cycle costs, research and development costs, and procurement profiles over time. Estimates of R&D, acquisition, and thirty five-year operating and support costs for each alternative should be included in the COEA and coordinated with the Cost Analysis Improvement Group-(CAIG). This will require separate estimates of R&D, procurement, construction, manpower, and O&M costs, including decommissioning costs and disposal costs as well as any incremental costs associated with reconstituting and/or maintaining the shipbuilding industrial base if necessary. Comparing Cost and Effectiveness Cost and effectiveness comparisons are rarely useful when reduced to single measures or simple ratios, unless accompanied by supporting data. There is no single formula for combining cost and effectiveness measures to identify a preferred alternative. The COEA should assist in evaluating alternatives by providing a solid framework for evaluating alternatives and by highlighting the implications of alternative choices. In that regard, it is essential to: