Total Ownership Cost (TOC) is defined as the sum of all system costs including research, development, acquisition, operation and support (O&S), deactivation and disposal. Historically, O&S costs are approximately 75% of the budget of a system. Based on current projections, the Department of Defense budget will remain nearly constant with only inflationary growth for the foreseeable future. Therefore, when new, more capable systems are needed, they must be funded by reducing expenditures (primarily O&S) on active programs. The Navy recognizes this budgetary reality. Therefore, TOC must be a controlling factor in system design for all new acquisition programs. TOC reduction is not just "buying from the low bidder" at each stage; it involves a long-term view of system employment and sustainment that seeks to recognize opportunities to minimize and/or optimize ownership costs versus operational characteristics right from the start.
Therefore, the Supplier must design out maintenance drivers and design in high inherent reliability. The Supplier must select materials and components that minimize maintenance demands. Maintenance analysis, predicated on the increased application of Condition-Based Maintenance (CBM) and the shift of time-directed to condition-directed tasks shall lead to the establishment of a reduced set of Corrective Maintenance (CM) and Preventive Maintenance (PM) tasks. Corrective and preventive maintenance tasks should use CBM and Reliability Centered Maintenance (RCM) analysis.