CDFM Budget and Cost Analysis 2 — Questions and Answers
Question 1: In DoD cost estimating, what is the primary purpose of a Cost Estimating Relationship (CER)?
- To establish a legal ceiling on contract costs
- To statistically relate cost to one or more technical or physical characteristics (Correct answer)
- To document prior year actual expenditures for audit purposes
- To allocate costs across multiple appropriation accounts
Correct answer: To statistically relate cost to one or more technical or physical characteristics
A CER is a mathematical expression that relates cost to measurable technical or physical parameters (e.g., weight, speed, power), derived through regression or engineering analysis.
Question 2: Which Budget Activity (BA) under Operations and Maintenance (O&M) appropriations funds the day-to-day operations of active military forces?
- BA 1 - Operating Forces (Correct answer)
- BA 3 - Training and Recruiting
- BA 4 - Administrative and Servicewide Activities
- BA 2 - Mobilization
Correct answer: BA 1 - Operating Forces
Budget Activity 1 (Operating Forces) funds the operational costs of combat and combat support forces conducting their primary missions.
Question 3: What is 'Obligation Authority' (OA) in the context of DoD budgeting?
- The total amount Congress has appropriated for a fiscal year
- The legal authority to enter into binding agreements that will require future payments (Correct answer)
- The amount of funds transferred from one appropriation to another
- The ceiling on reimbursable agreements with other agencies
Correct answer: The legal authority to enter into binding agreements that will require future payments
Obligation Authority is the legal permission to commit the government to pay for goods or services, creating a financial liability against an appropriation.
Question 4: Under the DoD Planning, Programming, Budgeting, and Execution (PPBE) process, what document does a Service submit to OSD that details its 5-year resource plan?
- Program Objective Memorandum (POM) (Correct answer)
- Budget Estimate Submission (BES)
- Future Years Defense Program (FYDP)
- Program Decision Memorandum (PDM)
Correct answer: Program Objective Memorandum (POM)
The Program Objective Memorandum (POM) is the Service's formal proposal to OSD that aligns resources with strategy over the 5-year Future Years Defense Program period.
Question 5: What cost concept does 'Should Cost' analysis emphasize in DoD acquisition?
- Historical cost adjusted for inflation
- The contractor's proposed cost plus a standard profit margin
- An independent estimate of what a program ought to cost with management efficiency improvements (Correct answer)
- The statutory cost cap established by Congress in the defense authorization act
Correct answer: An independent estimate of what a program ought to cost with management efficiency improvements
Should Cost analysis challenges historical spending patterns and identifies opportunities to reduce costs through improved management, better buying power, and eliminating inefficiencies.
Question 6: Which type of appropriation remains available for obligation for more than one fiscal year but has a fixed expiration date?
- Annual appropriation
- No-year appropriation
- Multi-year appropriation (Correct answer)
- Supplemental appropriation
Correct answer: Multi-year appropriation
Multi-year appropriations (e.g., 3-year Procurement funds) are available for obligation over a defined period of more than one but not an unlimited number of fiscal years.
Question 7: In earned value management (EVM), what does a negative Schedule Variance (SV) indicate?
- The project is under budget
- The project is ahead of schedule
- The project is behind schedule (Correct answer)
- The project has exceeded its performance measurement baseline
Correct answer: The project is behind schedule
Schedule Variance (SV = BCWP - BCWS) is negative when the Budgeted Cost of Work Performed is less than the Budgeted Cost of Work Scheduled, meaning less work was accomplished than planned.
CDFM Budget and Cost Analysis 2
In DoD cost estimating, what is the primary purpose of a Cost Estimating Relationship (CER)?