Activity Based Cost Structure Analysis of Submarine Force Readiness

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Neall, David
St. George, Jeffrey
Williamson, Timothy
Wise, Leonard
Crawford, Alice
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Monterey, California. Naval Postgraduate School
EXECUTIVE SUMMARY: Commander, Submarine Forces (COMSUBFOR) has been directed by the Chief of Naval Operations (OPNAV) to develop a financial model that relates force readiness to budget authority given in the Navy’s Ship’s Operations Account (O&MN 1B1B). In order to develop this model, COMSUBFOR must identify the significant cost drivers with regard to submarine operations and the activities that influence them. Peninsula Graduate Consultants (PGC) has completed an analysis of a total of 33 submarine years of Fleet Readiness Training Plan (FRTP) activities and the associated repair part (1B1B-SR) spending on a daily basis. We applied our analysis to the SSN-688/688i submarines of Submarine Squadrons Two (CSS-2) and Six (CSS-6) during calendar years 2005, 2006, and 2007. All financial data was computed in terms of calendar year 2007 dollars. Furthermore, we retroactively applied the current Submarine Force business rules that define in what phase a ship is operating within the FRTP structure and the criteria for a ship to transition between phases. The repair part data was obtained from the Naval Sea Systems Command Logistics Center Open Architecture Retrieval System (NSLC OARS). Each requisition with its corresponding issue quantity, date of requisition, and net cost (accounting for issue quantity and net effect of DLR turn-in credit) was compared to each ship, by date, activity, and FRTP phase. The following are the conclusions of Peninsula Graduate Consultants. COMSUBFOR units are not providing NSLC with accurate data. Corrective and preventive maintenance requisitions are being submitted in a manner such that we were unable to isolate corrective versus preventive maintenance in OARS. The relationship between FRTP events (activities and phases) and spending is limited. Other OPTAR spending is not maintained in a format that can be correlated to date, activities, and phases. Evaluating spending by each item’s defined Mission Criticality Code (MCC) provides a focus area if maintenance must be deferred due to fiscal constraints. The following are the recommendations of Peninsula Graduate Consultants. First, adapt a method of data entry in OARS so preventive and corrective maintenance items are isolable. Commander, Naval Surface Forces Atlantic (COMNAVSURFLANT) procedures accomplish this and can be referenced for ease of implementation. Second, conduct an analysis of spending versus startups and shutdowns. This will help to determine if cycling equipment is a significant driver of maintenance spending. Third, focus on spending versus MCC when faced with funding reductions. Some items of lesser essentiality in terms of the ship’s missions and mobility may be deferrable; however, consideration must be given for the risk of a “snowball effect” resulting from numerous small items being deferred simultaneously. Finally, evaluate spending versus FRTP phase as variable on a daily basis rather than a monthly basis, which is the current method. The Force should add a tracking mechanism (“concurrent event bar” in WEBSKED) which the Operations Department will maintain to keep an accurate history of each ship’s progression through the FRTP.
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