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countable for the function and should be assisted by those performing the function. The performance work statement (PWS) of objectives should be formulated at three levels:

1. Threshold. This is the minimum level of performance and may require some restrictions and/or assistance from the user. For example, air operations at an outlying field may be restricted to certain hours of operations or a contingent from ship's force may be required to assist in security patrols. The specific restrictions and/or assistance should be spelled out in detail.

2. Objective. This is the expected or normal level of performance. It should be specific in terms of scope of services, timeliness, and so on, that define the goods or service provided. For example, berthing will be provided for up to six Aegis cruisers without nesting; 4,000 amperes of electrical power will be provided within 15 minutes of berthing; 25,000 gallons of fresh water will be provided per day at 30 pounds per square inch constant pressure; and so on.

3. Enhanced. This is a level of performance over and above the objective that may be required for special situations. For example, special security during special weapons handling or transportation might be provided.

Step 4—Performance Work Statement Cost

With an agreed-to statement of work and performance, it is now possible to determine the cost of the goods or service. This statement is broken down into three substeps:

1. Activity-based spending (ABS). This is often looked at as activity-based costing, but it is only the first step. Here a survey is made of what the institution is spending on a function. This establishes the differences in spending between various activities doing similar work and determines what the activity is spending resources on and what it is not spending money on. This is the first check on the performance work statement to establish that it is complete (i.e., one is spending resources on all of the elements within the PWS) and has not overlooked a necessary performance within the PWS (i.e., spending resources on something that is not in the PWS rather than something that one should be spending on). This leads to a possible revision of the PWS.

2. Capitalization. After it has been determined what an activity is currently spending on a function, an analysis should be conducted to determine if an additional investment in capital (e.g., a new information system, additional training) would result in a net lower cost of operations.

3. Activity-based costing (ABC). This takes ABS to the next step, which is determining what a function “should” cost. It can be accomplished in a number of ways:



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