A need has been identified which will require the addition of a new

communications capability to a ground transportation system. This new

communications capability, referred to as System "XYZ", must be developed,

and there are two different supplier configurations being considered for

procurement. Based on the information provided: (a) compute the life-cycle

cost for each of the two configurations; (b) plot the applicable cost

streams (discounted and undiscounted); (c) accomplish a breakeven

analysis; and (d) select a preferred approach. In computing present value

costs, assume a 15% discount factor.

System "XYZ" is to be installed in a transportation vehicle, and the total

number of systems in operational use for each year of the projected life

cycle is noted below. It is assumed that the vehicles will be distributed,

with the first 12 systems in Area "A", the next 12 systems in Area "B",

etc.

Year Number

I

2

'

3

4

5

6

7

8

9

1 0

0

1

0

10

20

40

60

60

60

35

25

It is assumed that each System "XYZ" will be utilized on the average of 4

hours per day, 365 days per year. The vehicle operator is assigned to

operate a number of different systems throughout the accomplishment of a

mission, and it is assumed that 1% of his time is allocated to System

"XYZ".

System "XYZ" is a newly designed entity, and each of the two candidate

configurations is packaged in three units: Unit "A", Unit "B", and

Unit "C", as illustrated.

System

XYZ

System Requirement

MTBM, MTBF,

U n i t

A

U n t

B

U n i t C

The predicted reliability and maintainability factors associated with each

of the two candidate configurations are noted in the table below.

Relative to the maintenance concept, two levels of maintenance are assumed

(with an intermediate-level shop in each of the five geographical areas).

Each of the two configurations incorporates a built-in self-test

capability that enables rapid system checkout and fault isolation to the

unit level. No external support equipment is required for organizational

maintenance on the vehicle. In the event of a "no-go" condition, fault

isolation is accomplished to the unit and the applicable unit is removed,

replaced with a spare, and the faulty unit is sent to the intermediate-

level maintenance shop for corrective maintenance. Unit repair is

accomplished through module replacement, with the modules being discarded-

at-failure (i.e., the modules are assumed to be "non-repairable").

Scheduled (preventive) maintenance is accomplished for configuration "A"

(Unit "A") and configuration "B" (Unit "B"), as noted in

the table, in the intermediate-level shop every six (6) months. No

supplier-level (or depot) maintenance is required; however, the supplier

does provide backup supply and support functions as required.

Parameter*

I Configuration A

Configuration

B

System Level (Organizational Maintenance)

MTBM

MTBM,, (or MTBF)

M

195

hr

267

hr 30

min

249 hr

377 hr

30 min

Unit Level (Intermediate Maintenance)

Unit

A

MTBM

MTBM,,

MTBM,

Mct

Mpt

Unit

B

MTBM

MTBM,,

MTBM,

Mct

Mpt

Unit C

MTBM

Mct

382 hr

800 hr

730 hr

5 hr

16 hr

500 hr

500 hr

4

hr

2.000 hr

2hr

8 0 0 h r

8 0 0 h r

-

5hr

-

4 2 2 h r

1 . 0 0 0 h r

7 3 0 h r

5 hr

12 hr

2.500 hr

3hr

*Assume that MTI3M. = MTBF. When there is no scheduled

maintenance. MTBM. = MTBM.

The requirements for System "XYZ" dictate the program profile in the figure

below. Assume that life-cycle costs are broken down into the three categories

represented by the blocks in the program profile (i.e., Design and

Development, Production, and Operations and Maintenance).

Year Number

1

2

3

4

5

6

7

8

9

I

0

Design and

Development

Production

Operations and

Maintenance

Design and

Development

Production

Operation and Maintenance

In an attempt to simplify the problem, the following

additional factors are assumed:

(1) Design and development costs for System "XYZ" (to include

labor and material).

Configuration "A": $ 80,000 ($ 50,000/year 1 and $

30,000/year 2) Configuration "B": $ 100,000 ($ 70,000/year

1 and $ 30,000/year 2)

(2) Design and development costs for special support

equipment at the intermediate level of maintenance.

Configuration "A": $ 30,000 ($ 20,000/year 1 and $

10,000/year 2)

Configuration "B": $ 23,000 ($ 17,000/year 1 and $ 6,000/year

2)

(3) System "XYZ" models for operational use are produced and

delivered in the year prior to the identified need

(i.e., 10 models are produced and delivered in year 2,

etc.). The production costs for each System "XYZ" (Units

"A", "B", and "C") are:

Configuration

"A": $ 21,000

Configuration

"B": $ 23,000

(4) Special support equipment is required at each intermediate

maintenance shop (for the corrective maintenance of units)

at the start of the year when System "XYZ" operational

models are distributed (i.e., Area "A" at the beginning of

year 3). In addition, a backup set of special support

equipment is required at the supplier location when the

first intermediate shop becomes operational. Special

support equipment is produced and delivered at a cost of:

Configuration "A" support equipment:

$ 13,000 Configuration "B" support

equipment: $ 12,000

(5) Spare units are required at each intermediate-level

maintenance shop at the time of activation. Assume that

one (1) Unit "A", one (1) Unit "B", and one (1) Unit "C"

constitute a set of spares, and that the cost of a set is

equivalent to the cost of a production system (i.e., $

21,000 for Configuration "A" and $ 23,000 for

Configuration "B"). Also, assume that a set of spares is

stocked at the supplier's facility at the time when the

first intermediate shop is activated.

Additional spares constitute components (1.e., assemblies,

modules, parts, etc.). Assume that the material costs are $

250 per corrective maintenance actions, and $ 100 per

preventive maintenance action. The cost factors include

amortized inventory maintenance costs.

(6) Maintenance facilities, as defined here, include the

supporting resources required for System "XYZ" (i.e., at

the intermediate shop), above and beyond

spares/inventories, personnel, and data. A burden rate of

$1 per direct maintenance manhour associated with the

prime equipment is assumed.

(7) Maintenance data include the preparation and

distribution of maintenance reports, failure reports, and

related data associated with each maintenance action.

Maintenance data costs are assumed to be $ 25 per

maintenance action

.

(8)

For each maintenance action at the system level, one (1)

low-skilled technician at $ 20 per direct maintenance

manhour is required on a full-time basis. It is assumed

that this is an average value, applied throughout the life

cycle, and it includes direct, indirect, and inflationary

factors. The M is 30 minutes for each of the two

configurations

.

(9)

For each corrective maintenance action involving Unit

"A",

-

or Unit "B", or Unit "C", two (2) technicians

are required on a full-time basis (i.e., the duration

of the Mct value). One (1) low-skilled technician at

$ 20 per hour and one (1) high-skilled technician at

$ 30 per hour are required. Direct, indirect, and

inflationary factors are considered in these average

values.

(10)

For each preventive maintenance action involving units

(Configurations "A" and "B"), one (1) high-skilled

technician at $ 30 per hour is required on a full-time

basis (i.e., the duration of the Mpt value).

(11)

For the operation of System "XYZ", the allocated cost

for the operator is $ 40 per hour.