Phase: Select a preferred alternative
22. Compare Alternatives
Definition: The AOA team or the decision-maker compares the alternatives in order to select a preferred alternative that best meets the mission need. This should be done using NPV, if possible. NPV can be negative if discounted costs are greater than discounted benefits. NPV is the standard criteria used when deciding whether an alternative can be justified based on economic principles. In some cases, NPV cannot be used, such as when quantifying benefits is not possible. In these cases, the AOA team documents why NPV cannot be used. Furthermore, if NPV is not used to differentiate among alternatives, the AOA team should explain why another method has been applied, describe the other method that is used to differentiate, and ensure that the rationale used to select a preferred alternative is clearly documented so that a reviewer outside of the AOA process will be able to follow the logical reasoning.
Effect: Comparing items that have not been discounted (or normalized) does not allow for time series comparisons since alternatives may have different life cycle durations. Additionally, not clearly documenting the rationale used to select a preferred alternative will lower the confidence in the results of the AOA process and present the appearance of bias surrounding the selected alternative.
The phases should occur in sequence to prevent bias from entering the analysis and adding risk that the AOA team will analyze alternatives that have not been defined. The exception is the Document and Review phase that can be conducted throughout the AOA process. Some best practices can take place concurrently and do not have to follow the order presented above. For example, best practice 5 (define selection criteria) can be done at the same time as best practice 6 (weight selection criteria), and best practice 18 (document AOA process in a single document) can be done at the end of every step or every phase to ensure the AOA process is accurately and completely documented. The best practices represent an overall process that results in a reliable AOA that can be easily and clearly traced, replicated, and updated. Figure 40 shows the AOA process and how the steps in each phase are interrelated.
Figure 40: Analysis of Alternatives Process Chart
Initialize
- Define mission need
- Define functional requirements
- Develop AOA timeframe
- Establish AOA team
- Define selection criteria
- Weight selection criteria
- Develop AOA process plan
Identify
- Develop list of alternatives
- Describe alternatives
- Include baseline alternative
- Assess alternatives’ viability
Analyze
- Identify risks and mitigations
- Determine and quantify benefits
- Tie benefits and effectiveness to mission need and functional requirements
- Develop LCCEs
- Include confidence interval for LCCEs
- Perform sensitivity analysis
Document and Review
- Document AOA process in a single document
- Document ground rules, assumptions and constraints
- Ensure AOA process is impartial
- Perform independent Review
Select
- Compare alternatives
Note: The figure displays the AOA process by each phase and step. The Initialize, Identify, Analyze, and Select phases should be conducted in order (as indicated by the arrows between those phases), but the Document and Review phase can be conducted throughout the AOA process. The small arrows in the middle of the figure indicate that the “Document and Review” phase is related to the other four phases. Within each phase, there are steps that can be done concurrently rather than in sequence. The concurrent steps are grouped together in dark boxes. The smaller arrows within each phase indicate the order that the steps in that phase should be performed. LCCEs = life cycle cost estimates.