Version 3.0 (Draft) Last Updated: 10 November 2011

1. AMERICA’S ARMY: THE STRENGTH OF THE NATION Cost-Benefit Analysis (CBA) Four-Day Training Briefing Step 1: Problem/Opportunity and Objective Visit our CBA Website for more information regarding locations, signing up, upcoming training sessions, and more https://cpp.army.mil Version 3.0 (Draft) Last Updated: 10 November 2011

2. Key Learning Objectives CBA team members will: Use tools and techniques to develop statements describing: Problem/Opportunity Objectives Background

3. Step 1 Overview: Define Problem/Opportunity and Objective • The Background/Strategic Context • Provides the contextual information needed to understand the problem, need, or opportunity addressed in the CBA. • The Problem/Opportunity Statement: • Defines unfulfilled customers’/stakeholders’ needs and expectations • Defines an opportunity to optimize/improve the performance of a product and/or service for the end user • The Objective: • Describes the role of the CBA: what is the decision to be made, and how does the CBA inform and support it. What is the purpose of the analysis? • Background: • Discusses the circumstances that describe aneed for the CBA 1 • KeyQuestions: • Does the Problem/Opportunity Statement provide a definition of the output performance issue/need? • Does the objective meet the leadership’s needs? What major stakeholders are likely to be impacted? * Product(s) and/or service(s) are outputs with expected levels of performance (i.e., levels of efficiency and effectiveness) from a customer/stakeholder. When customer/stakeholder expectations are not met, then there is an issue/problem requiring an alternative/solution.

4. Background/Strategic Context • “The background and circumstances define and assess the current state/condition. They provide the contextual information needed to fully understand the problem, need, or opportunity addressed in the Cost Benefit Analysis” (CBA Guide, “Step 1” https://cpp.army.mil)

5. Background and Strategic Context • The problem/opportunity statement and objective should be accompanied by additional background information to help the reader understand various aspects of the problem • The context in which the problem exists • The guidance from senior leaders that establishes the importance of the requirement • The history of how the current situation came to exist • Background information should be substantial enough for all stakeholders to understand and support the Problem/Opportunity Statement.

6. Background and the Status Quo • If the status quo isn’t considered a valid solution, the background information should explain why. Guideline: The status quo might not be a valid option if the required performance is not being achieved. For example: • If the CBA addresses a new requirement – one that is currently not being accomplished either well or poorly – there might not be a status quo. • If the CBA objective is to improve output to a level that far exceeds the current level, there might not be a status quo. In this case, the implicit decision has already been made to select a COA beyond the status quo. • If the status quo achieves the desired output but does so at a high cost, the status quo might not be considered a valid alternative.

7. Problem/Opportunity Statements • “A problem statement clearly defines the problem, mission need, and required capability. When developing a problem or opportunity statement, the key is to state the problem or opportunity in terms of the organization’s mission that requires a solution to describe what the effort intends to accomplish.” (CBA Guide, “Step 1”, https://cpp.army.mil)

8. Problem/Opportunity Statement Key Questions • Define the problem/opportunity succinctly in terms of Who, What, When, Where, and Extent. • Who is experiencing the issue? • Who will receive the benefits from an improved product or service? • Specifically, who are the stakeholders/process owners? WHO • What required performance is not being achieved? • What are the problems being addressed: defects, delays, rework, mistakes, etc.? WHAT • When, how, and where does the problem/opportunity occur? • When did it begin? This could be as simple as “as long as we know”. WHEN/HOW/ WHERE • What is the extent of the problem in terms of magnitude or trend (changes in magnitude)? EXTENT The Problem/Opportunity Statement should include this information.

9. Determining Unfulfilled needs

10. Common Mistakes Problem stated as predetermined solutioninstead of as problem, as in the form, “We need more money.” Problem does not reflect the stakeholder concerns Problem is based on anecdotal information

11. Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2.5% per year for the past 8 years, while the inflation rate for the same period has remained constant at 3% per year. This fiscal year, the budget has been abruptly cut by 10% compared to the previous year. Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft. Hampton, which will soon be under repair and unavailable for use. Determine the correct problem statement.

12. Problem/Opportunity Statement Exercises 1) The total operating budget at Fort Hampton (in then-year dollars) has increased at a rate of 2.5% per year for the past 8 years, while the inflation rate for the same period has remained constant at 3% per year. This fiscal year, the budget has been abruptly cut by 10% compared to the previous year. Two hundred HMMWVs manufactured each year are temporarily stored in a facility at Ft. Hampton, which will soon be under repair and unavailable for use. Solution: Because the current storage facility at Ft. Hampton will soon be unavailable for use, the Army must determine the best way to store HMMWVs.

13. Problem/Opportunity Statement Exercises • The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a major supply route. Determine the problem statement and objective.

14. Problem/Opportunity Statement Exercises 2) The Commander, USCENTCOM has asked for a comparison of three alternatives for clearance of IEDs along a major supply route in Afghanistan. Determine the problem statement and objective. Solution: Problem statement—IEDs placed along major roads threaten the lives of coalition troops and the movement of critical supplies. Objective—to inform Commander, USCENTCOM decision on alternatives for IED clearance.

15. Validate the CBA Problem/Opportunity Defining the problem/opportunity is the first step in developing a CBA; however, it is important to collaborate with CBA key players to ensure leadership agrees that the CBA addresses the decision.

16. Example - Stakeholders in the Army Typical Stakeholders by CBA

17. Objective Statement • The objective statement describes the role of the CBA: what is the decision to be made, and how does the CBA inform and support it? What is the purpose of the analysis?

18. Objective Statement: Examples • “To inform Congressional decision on funding for winter storage of HMMWVs at Fort Benning.” • “To inform senior leader decision on the allocation of DAC, contractor, and military labor to perform the physical security function at Camp Victory.”

19. Review Exercise: Henry Ford • In a rented garage at 58 Bagley Street in Detroit, Henry Ford completed his first gas-powered car on the morning of June 4, 1896. He had spent $250 FY1896 dollars on equipment to build the car, and $100 on labor. The garage cost $15 per month to rent. After the car was assembled, it was clear that it would not be able to fit through the door of the rented garage. The car was to be used as a model for the two-year long test-driving phase of his R&D process, with the final goal of arriving at a model for mass production and sale. Determine the correct problem/opportunity statement and objective.

20. Review Exercise: Henry Ford • In a rented garage at 58 Bagley Street in Detroit, Henry Ford completed his first gas-powered car on the morning of June 4, 1896. He had spent $250 FY1896 dollars on equipment to build the car, and $100 on labor. The garage cost $15 per month to rent. After the car was assembled, it was clear that it would not be able to fit through the door of the rented garage. The car was to be used as a model for the two-year long test-driving phase of his R&D process, with the final goal of arriving at a model for mass production and sale. Determine the correct problem/opportunity statement and objective. Solution: Problem statement—the next phase of Ford’s R&D process cannot proceed without a drivable car. Objective—to inform Ford’s decision on how to obtain a car for test-driving.