162.3—Definition.
(a) Capital Investment.
The acquisition, installation, transportation, and other costs needed to place equipment or facilities in operation meeting DoD capitalization requirements.
(b) Economic Life.
The time period over which the benefits to be gained from a project may reasonably be expected to accrue to the Department of Defense.
(c) Internal Rate of Return (IRR).
The discount rate that equates the present value of the future cash inflows, e.g. savings and cost avoidances, with the present value costs of an investment.
(d) Life-Cycle Savings.
The estimated cumulative budgetary savings expected over the life of the project.
(e) Net Present Value of Investment.
The difference between the present value benefit and the present value cost at a given discount rate.
(f) Off-the-Shelf.
Equipment that is readily available through Government or commercial sources or that can be fabricated through combination or modification of existing equipment.
(g) Pay-Back Period.
The number of years required for the cumulative savings to have the same value as the investment cost.
(1) Savings.
Benefits that can be precisely measured, quantified, and placed under management control at time of realization. Savings can be reflected as specific reductions in the approved program or budget, after they have been achieved. Examples include costs for manpower authorizations and or funded work-year reductions, reduced or eliminated operating costs (utilities, travel, and repair), and reduced or eliminated parts and contracts.
(2) Cost-Avoidance.
Benefits from actions that obviate the requirements for an increase in future levels of manpower or costs that would be necessary, if present management practices were continued. The effect of cost-avoidance savings is the achievement of a higher level of readiness or increased value (quantity, quality or timeliness) of output at level staffing cost or the absorption of a growing work load at the same level of staffing or cost.
(i)
Post-Investment Assessment (PIA). A PIA is conducted by DoD Components to establish accountability and provide information to improve future investment strategies.
(j) Productivity.
The efficiency with which resources are used to provide a government service or product at specified levels of quality and timeliness.
(k) Productivity Enhancement (or Productivity Improvement).
A decrease in the unit cost of products and services delivered with equal or better levels of quality and timeliness.
(l)
Productivity Enhancing Capital Investment (PECI). Equipment or facility funding that shall improve Government service, products, quality, or timeliness. PECI projects are funded using PIF, PEIF, and CSI programs. These programs are defined as follows:
(1)
Productivity Investment Fund (PIF). PIF projects cost over $100,000 and must amortize within 4 years from the date they become operational. In FY 1994 the threshold changes to $150,000.
(2)
Productivity Enhancing Incentive Fund (PEIF). PEIF projects cost under $100,000 and are expected to amortize within 2 years of the date they become operational. In FY 1994 the limit changes to $150,000.
(3)
Component-Sponsored Investment (CSI). CSI projects are fast pay-back or high interest investments that may have different DoD Component selection criteria than those specified for PIF or PEIF projects.
(m) Quality.
The extent to which a product or service meets customer requirements and customer expectations.