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Department of Defense INSTRUCTION


DoDI 5000.02, January 7,

DoDI 5000.02, January 7, 2015 (1) Future Budget. A future total budget projection for each DoD Component for affordability analysis provides the first-order economic estimate for allocation of future resources to each portfolio. This projection establishes a nominal rather than optimistic foundation for the future and covers all fiscal demands that compete for resources in the Component, including those outside acquisition and sustainment. (2) Time Horizon. Component level affordability analysis examines all programs and portfolios together, extending over enough years to reveal the life-cycle cost and inventory implications of planned program for the Component. The same analysis is used as individual programs come up for review. Nominally, affordability analysis covers 30 to 40 years into the future. (3) Consistency. The aggregation of portfolio cost estimates for each year, when combined with all other fiscal demands on the Component, may not exceed the Component’s reasonably anticipated future budget levels. (4) Fiscal Guidance. Absent specific Component-level guidance by the Director of Cost Assessment and Program Evaluation DCAPE or the Defense Acquisition Executive, each Component projects its topline budget beyond the FYDP using the average of the last 2 years of the current FYDP and the OSD inflator provided by the Under Secretary of Defense (Comptroller) (USD(C)), resulting in zero real growth. (5) Inflators. Affordability analysis assumes constant purchasing power. Each Component uses the OSD inflator provided by USD(C) in the Component’s future total budget projection and to inflate their cost estimates for comparison against affordability constraints, assuming budgets will be adjusted later for any differential inflator issues. (6) Portfolios. Components will subdivide their accounts into portfolios to facilitate trade-off analysis; but when summed, the total cost for all portfolios and their elements cannot be above the Component’s future total budget projection. Components may use existing affordability portfolios, which will be stable between affordability analysis updates. When the analysis is presented for a specific program’s review, the Component will employ the relevant portfolio to facilitate understanding and discussion of life-cycle costs and inventories of related acquisition systems. (7) Other Portfolio Plans. The Component’s affordability analyses should be consistent with any relevant existing portfolio plans and strategies such as those required by statute (i.e., the 30-year plans required by 10 U.S.C. 231 (for ships) and 10 U.S.C. 231a (for aircraft) (Reference (g) (h))). (8) Affordability Analysis Updates. Each Component maintains and updates its affordability analysis as needed at the Component or portfolio level to reflect significant changes such as large cost growths in portfolios and programs, changes in defense strategy, force structure changes, or major budgetary changes. Change 2, 02/02/2017 136 ENCLOSURE 8

DoDI 5000.02, January 7, 2015 b. Affordability Analysis Output Format. Each Component’s affordability analysis is presented within the governance framework to the MDA in preparation for major acquisition decisions in a format that demonstrates the affordability of the program within the Component and portfolio context, to ensure that the resulting affordability constraints are understood and consistent with the future total budget projection. Transparency ensures that the risk, cost implications, and alternatives of system acquisitions and sustainment are sufficiently understood by the Component leadership and the programming, resource planning, requirements, intelligence, and acquisition communities. (1) Data Format. At each major acquisition decision point or milestone, the DoD Component will provide stacked area charts (“sand charts”) and underlying spreadsheets. These provide the estimated allocations by year for each program and portfolio of the analysis— including all programs in all portfolios—against the future total budget projection equivalent to the DoD Component’s Total Obligation Authority. (2) Data Requirements for Programs. Affordability analysis must be consistent with the data in the Cost Analysis Requirements Description for a program under review, including the capability requirements, quantity, and schedule used in the analysis. Affordability analysis also provides data to support the procurement and sustainment constraints that will be documented in the acquisition decision memorandums (ADMs) resulting from the Materiel Development Decision (MDD), Milestone A, and Development Request for Proposals (RFP) Release Decision Point, and in the acquisition program baselines normally set at Milestone B and beyond. c. Timing of Affordability Analysis. Affordability analysis should be conducted as early as possible in a system’s life cycle so that it can inform early capability requirements trades and the selection of alternatives to be considered during the AoA. Affordability constraints are not required before the MDD; however, conducting some analysis before that point is beneficial. The best opportunity for ensuring that a program will be affordable is through tailoring capability requirements before and during the AoA(s) and early development. Thus, the Components will incorporate estimated funding streams for future programs within their affordability analyses at the earliest conceptual point and specify those estimates at the MDD and beyond to inform system design and alternative selection. d. Importance of AoAs to Affordability. Examination of key requirements cost-performance relationships, when merged with affordability analysis results during AoAs, provides the information needed to support sound material materiel solution decisions about affordable products. e. Affordability Constraints: Goals and Caps (1) Affordability constraints are established to inform the capability requirements validation authority, Program Manager, and AoA team of the cost limitations dictated by the Component’s affordability analysis. Early in a program, affordability goals are set to inform capability requirements and major design tradeoffs needed to define the product being acquired. Once requirements and the product definition are firm (prior to Milestone B), affordability caps are established to provide fixed cost requirements that are functionally equivalent to Key Change 2, 02/02/2017 137 ENCLOSURE 8