German Navy - Using Opus Suite for major procurement program
The German Armed Forces have started using Opus Suite in its LCC work, through the organization BAAINBw. Our partner in the German defense market Heiko Grossmann from Altenbach Consult develops his view of the LCC methodology in Germany and how it is applied in the ongoing MKS 180-procurement.
The German Armed Forces have started using Opus Suite in its LCC work, through the organization BAAINBw. Our partner in the German defense market Heiko Grossmann from Altenbach Consult develops his view of the LCC methodology in Germany and how it is applied in the ongoing MKS 180-procurement.
The German Navy intends to procure a new class of multi-role combat ship called the MKS-180 class. Besides the quality and the price for the delivery of ships, mission modules and the shore infrastructure for supporting the multi role combat ship the German federal procurement office BAAINBw will make the expected lifecycle costs (LCC) of the ship class one of the emphasized features of the request for deliveries and services.
When the Navy decides to buy a modern class of new major combat ships, the procurement agency’s project team has already done their homework. After requirement capture they have assessed various possible benchmark solutions and performed in-deep cost estimations for development, delivery and lifecycle operation and maintenance of the ship class. This is reflected in the national defense budget planning.
When a procurement agency uses the bidder’s promises regarding future lifecycle costs as one means to decide between bids, it is absolutely necessary that the LCC calculations of the competing bidders are comparable. For this purpose, a procurement agency should make unambiguous prescriptions for the modelling assumptions and the terminology conventions to be adhered. The bidders should be provided with OPUS10 and CATLOC modelling templates that contain these assumptions. As a result, the bidders will be enabled to produce absolutely comparable and similarly structured LCC models with their next bid. The only – and significant – difference between the bidder’s models shall be their respective offering.
The LCC models are however not only required for contributing to the evaluation of the bids. It is from our point of view absolutely necessary to have the future contractor contractually guarantee the promised LCC at least for a considerable portion of the operations phase. Otherwise the LCC requirement turns out to be a “toothless tiger”, and future bidders will not take LCC as a serious issue in preparing their bid.
The MKS-180 frigate procurement can be regarded as a pilot project and blueprint for future large procurement programs in order to better manage the budget planning and the expenditure of armament budgets after the delivery phase. The underlying idea stems from a holistic view on costs taking not only the upfront development and delivery price but also the operating and maintenance expenditures into account when evaluating the quality of the proposed solutions.
By Heiko Grossman
AltenBach Consult GmbH