ACAP Economic Analysis and Life Cycle Costing

Question 1

What is the purpose of a Life Cycle Cost (LCC) estimate for an Army acquisition program?

Accepted Answer

To capture all costs from concept through disposal to support investment decisions and budget planning

Answer

To determine the unit production cost of the end item

Answer

To establish the contractor's fee structure over the program's life

Answer

To estimate only the development and procurement costs of the system

Question 2

In Army economic analysis, what does 'Net Present Value (NPV)' measure?

Accepted Answer

The current value of a stream of future costs and benefits discounted to a common reference date

Answer

The total undiscounted cost of a program over its life

Answer

The difference between then-year and base-year costs

Answer

The value of Army assets as reported on the balance sheet

Question 3

What discount rate does OMB Circular A-94 prescribe for most federal economic analyses of programs involving real costs and benefits?

Accepted Answer

7% real discount rate

Answer

3% real discount rate

Answer

10% real discount rate

Answer

The current Treasury borrowing rate

Question 4

What is 'Operations and Support (O&S) cost' in Army life cycle costing?

Accepted Answer

All costs incurred after fielding to operate, maintain, sustain, and support the system throughout its service life

Answer

Costs for developing the operations and support manuals

Answer

Sustainment costs covered under a contract with the original manufacturer

Answer

Costs for training Army personnel to use the new system

Question 5

Which Army document formally establishes the life cycle cost estimate used to support milestone decision reviews?

Accepted Answer

Program Life Cycle Cost Estimate (PLCCE)

Answer

Program Objective Memorandum (POM)

Answer

Acquisition Program Baseline (APB)

Answer

Defense Acquisition Executive Summary (DAES)

Question 6

What is the 'Army Cost Position (ACP)' and how does it relate to the PLCCE?

Accepted Answer

The ACP is the Army's official cost position for a program, typically derived from the ACEA's independent estimate and used as the basis for budget submissions

Answer

The ACP is a contractor-proposed cost used to negotiate contract prices

Answer

The ACP is the cumulative cost charged to a program's appropriation

Answer

The ACP is identical to the program office's own cost estimate