ACAP Economic Analysis and Life Cycle Costing 3

Question 1

What is the 'Fully Burdened Cost of Fuel (FBCF)' in Army economic analysis?

Accepted Answer

The total cost of delivering a unit of fuel to the point of use in a combat theater, including transportation, logistics, force protection, and casualty costs

Answer

The standard pump price of JP-8 fuel at Army installations

Answer

The cost of fuel plus the contractor logistics support fee

Answer

The annual fuel budget for a unit of Army vehicles

Question 2

What is 'total ownership cost (TOC)' and how does it differ from LCC?

Accepted Answer

TOC includes all LCC elements plus indirect costs borne by the broader Army enterprise (e.g., infrastructure, training base support), whereas LCC typically covers only program-specific costs

Answer

TOC is identical to LCC but expressed in then-year dollars

Answer

TOC excludes disposal costs that LCC includes

Answer

TOC is a commercial term while LCC is the DoD standard

Question 3

Under AR 11-18, when is an economic analysis (EA) required for Army decisions?

Accepted Answer

When proposed actions involve acquiring, constructing, leasing, or retaining government assets or when comparing alternative courses of action with significant resource implications

Answer

Only for ACAT I programs above the MDAP threshold

Answer

Only when required by OMB Circular A-94 for civilian-agency investments

Answer

Whenever a program's costs exceed $10 million in any single year

Question 4

What is 'residual value' in Army life cycle costing?

Accepted Answer

The estimated salvage or reuse value of a system or its components at the end of service life, which can offset disposal costs in the LCC

Answer

The remaining budget authority at the end of a fiscal year

Answer

The value of spare parts remaining in the supply chain after system retirement

Answer

The depreciated book value of a military asset on the DoD balance sheet

Question 5

What is the 'Army Procurement Appropriation' and how does it relate to life cycle costing?

Accepted Answer

It funds the production and initial fielding of Army systems, representing the procurement phase of the life cycle cost estimate

Answer

It funds all phases of Army system development from RDTE through O&S

Answer

It is the appropriation used to fund all Army operations, including fuel and maintenance

Answer

It funds Army infrastructure and construction projects related to system fielding

Question 6

What is the primary risk of focusing Army acquisition decisions only on procurement unit cost rather than total life cycle cost?

Accepted Answer

Systems optimized for low procurement cost often have higher O&S costs, resulting in greater total expenditure over the program's life

Answer

Low procurement cost always indicates low technical maturity and high schedule risk

Answer

Congress requires LCC justification, so unit cost-only analysis will be rejected

Answer

Unit cost ignores the contractor's fee, understating true acquisition cost