An analysis of the Cost of Base Realignment Actions (COBRA) model

Abstract

As the result of the deliberations of the 1993 Base Realignment and Closure Commission, the Department of Defense will close or realign over 100 military installations at a cost of over $5.5 billion. The Cost of Base Realignment Actions (COBRA) model is the primary financial analysis tool used by the Base Realignment and Closure Commission and the military departments to evaluate the costs and benefits of proposed base closures and realignments. This thesis examines three critical aspects of the model: the estimation of military construction costs, the prediction of overhead savings, and the choice of discount rate. COBRA cost estimates are compared to actual military construction costs for three Navy bases selected for closure/realignment in 1988: Naval Station, Brooklyn; Naval Station, Sand Point; and Naval Station, Hunters Point. Cost estimating relationships for overhead costs are developed for five categories of Navy/Marine Corps installations and compared to the COBRA models for overhead costs. The discount rate used for COBRA net present value analyses is evaluated with respect to directives in Office of Management and Budget Circular A-94. The final chapter draws conclusions on the accuracy of the COBRA model, identifies changes that may be made to improve the model, and suggests areas that require additional research.