Some of the highest on-going training costs are associated with providing instructors and their support. Training in the Immersive Virtual Environment (IVE) offers the opportunity to replace some of the instructor's tasks with intelligent avatars and tutoring systems, potentially reducing costs. However, traditional Artificial Intelligence (AI) system development can be costly, offsetting the delivery cost advantage. Low cost automated tutors and avatars lack the intelligence to meet the training need. Conventional belief is tutoring systems and avatars that demonstrate the required intelligence are cost prohibitive. This presentation proposes a process for intelligent tutoring and avatar development. We identify specific problems associated with developing intelligent tutors and avatars for high level intercultural skills training. We review approaches for addressing these problems. We apply them in a case study of intelligent tutor/avatar development using a graphics based Subject Matter Expert (SME) knowledge modeling system. We conclude with a Return on Investment (ROI) analysis of the approach and a description of a process going forward for producing an intelligent tutor/avatar based schoolhouse.