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© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence Data Collection and Analysis Supporting Defendable Cost Estimates Arlene Minkiewicz, Chief Scientist PRICE Systems, LLC [email protected]

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Page 1: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence

Data Collection and Analysis Supporting Defendable Cost Estimates

Arlene Minkiewicz, Chief ScientistPRICE Systems, LLC

[email protected]

Page 2: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 2

Agenda

Introduction Historical Prospective on Cost Estimation Data Driven Estimation and its Importance in the current

economic client Pilot Case Studies

– Software Data Collection– Automotive Data Collection and Analysis

Lessons Learned

Page 3: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 3

Introduction

Cost estimation in the Aerospace and Defense world emerged as a necessary around the time of World War II

All sorts of mathematical and experiential models have been applied to the problem with varying degrees of success

More and more organizations are pushing for models tuned to their specific data and experience

Many of these organizations lack the infrastructure, processes and tools to collect and analyze project data efficiently

This paper presents two pilot projects (both on-going) to inject data driven estimation into two very different organizations.

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© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 4

Historical Perspective

General H.H. “Hap” Arnold at the end of WWII

– “During the war, the Army, Army Air Forces, and the Navy have made unprecedented use of scientific and industrial resources. The conclusion is inescapable that we have not yet established the balance necessary to insure the continuation of teamwork among the military, other government agencies, industry, and the universities. Scientific planning must be years in advance of the actual research and development work.”

Page 5: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 5

Historical Perspective

Leaders took this to heart – state of the art weapons systems are necessary to ensure military superiority

Beginning of period of time during which the Department of Defense (DOD) is plagued with issues surrounding cost!

Page 6: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 6

Historical Perspective

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

PRICE H as an RCA Only Tool

Operations Research applied to Military Affairs

Proliferation of Commercially Available Cost Estimation Models

Great Depression

World War II

Severe DoD Project Cost Overruns

OSDCAIG

Formed

War on TerrorismBerlin Wall

Breached

RAND Created

PMI Created

PCProjectMgmtEVMTools

Parametric Estimating Initiative

ISPAFounded

KoreanISPA

Chapter

Defense Transformation

Operations Research and Statistics applied to Industrial Affairs

Homeland Defense

Gov’t & Industry Business ModernizationCost Overruns

J. Gordon DavisFrank Frieman

Page 7: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 7

Data Driven Estimation

Not a new idea – just a new focus on what’s behind an estimate

More credible and lends a a sense of defendability to any estimate

“Data-driven” estimation IS…

Page 8: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 8

Data Driven Estimation

Based on data extrapolation from analogous systems

Based on a model using analogous systems to determine model inputs

Based on a model calibrated to historical data

A “data-driven” estimate MAY BE…

Page 9: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 9

Data Driven Estimation

Transparent as to what data was used

Obtained from a credible, identifiable source

Clear about how that data was used

A “data-driven” estimate MUST BE…

Page 10: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 10

Case Study Pilot – Software Data Collection

Software data collection and analysis to support more defendable estimate

– Army Program Executive Office for Simulation, Training, and Instrumentation (PEO STRI)

– No data collection processes in place

– Pilot involves one large, complex program – two contractors – one does primarily development, one primarily integration

Page 11: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 11

Software Pilot - Motivation

PEO STRI personnel take their mission of delivering training to the warfighter seriously and intend to deliver best of breed solutions.

Estimates presented to the Office of the Deputy Assistant Secretary of Defense for Cost and Economics (ODASA-CE) are met with the question “Where’s the data that supports this estimate?”

Page 12: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 12

Software Pilot - Motivation

Unsatisfactory responses inspire large risk margins resulting in less budget available to the program

Furthermore, without insight into projected costs for specific capabilities, it is difficult to make trade-offs to accomplish reduced costs

PEO STRI wants to establish a consistent, repeatable process to collect cost and technical data for each capability they develop in their programs

Page 13: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 13

Data Collection – How will it be used

Page 14: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 14

Reporting Strategy for Maximum Benefit

Report

Report

Report

Page 15: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

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Data Collection and Normalization

Once the need for data collection has been identified, an important first step is identifying what to collect. This requires

– Understanding the goal of the collection program– Understanding what data is necessary to support that goal– Understanding what data is available or could reasonably be made available

Normalization guidelines need to be developed The next step needs to be documentation of these

understandings and guidelines in a clear, concise, understandable and repeatable fashion.

Automation eases the collection process, ensures consistency in the process and facilitates the process of normalization

Page 16: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 16

Data Collection – Keys to Success

Use of an Integrated Product Team (IPT)

Data Item Dictionary created to define….

– What data to collect– A clear understanding of the data

and potential uses– How often to collect it– How to align project specific data to

more general categories (across multiple contractors)

PEO STRI

PRICE

Contractors

Lots of collaboration between PEO STRI personnel, contractors and the PRICE team resulting in…..

Page 17: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 17

Data Collection – Keys to Success

Requirement added to Contract Deliverable Requirements List (CDRL) making data collection a contractor requirement

Creation of automated code counting tools by wrapping USC’s Code Counting tool with Excel to help ensure consistency of data

Software Resource Report (SRR) developed to align with output of code counting tool, automate mapping processes and align with potential uses

Lots of collaboration between PEO STRI personnel, contractors and the PRICE team resulting in…..

Page 18: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 18

Software Pilot – Software Resource Report

Page 19: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 19

PEO STRI Data Collection and Preparation Process

Collect OneSAF Program data using SRR forms. Data collected includes:

– Code counts (New, Modified, Deleted, Unmodified)

– Effort by Activity– Effort by Capability– Factors relevant to project, team & iteration

Extract data and import into TrueFindings ™ format

Create TruePlanning® Product Breakdown Structure (PBS) by:

– Contractor– Build– Capability

Page 20: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 20

PEO STRI Data Collection and Preparation Process

Calibrate the inputs of interest in TruePlanning® using data from TrueFindings ™

– Organizational Productivity– Functional Complexity by capability by language

Import the calibrated inputs into TrueFindings™ file

Drive inputs values using the “findings” from TrueFindings™ inside TruePlanning® to create defendable estimates.

Page 21: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 21

Software Pilot – Progress to Date

Data collection occurs every 10 weeks.

The first iteration was a thrown away

– Automation failures in the contractor configuration

– Uncertainty of some data definitions

– Additional discussions required by IPT to iron out questions and uncertainties

Four successful iterations have occurred since then – each resulting in slight refinement to the process, DID and/or SRR

A calibration process has been created and continues to be refined

Collected data and calibration results have been integrated into a TrueFindings database to support future estimation efforts

Page 22: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 22

Data Collection - Lessons Learned

Alleviate contractor concern about being ‘measured’ or misuse of data

Facilitate determination of data collection targets

Need buy in from the data collectors

Entire team needs to understand motivation for data collection

Page 23: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 23

Data Collection - Lessons Learned

Creates consistency Creates efficiency Reduces impact on contractors Promotes harmony Only means to handle such large

code counts / bases Facilitates normalization and

enforces normalization guidelines

Automation is key to success

Page 24: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 24

Data Collection - Lessons Learned

Communication, teamwork and building trust are paramount

Data needs to be inspected for quality and ported into an environment for easy analysis.

Page 25: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

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Conclusions

The need for data driven estimation is driving many organizations in Aerospace and Defense and industry in general to look for new ways to collect and use data

Data driven estimation is really nothing new – we have been using data (real or experiential) to justify our estimates forever. The new requirement is transparency and openness about the data and how it is being used.

To support this effort organizations may need to establish formal processes for collecting their project data.

When doing this it is important to understand the importance of – Communication– Automation– Flexibility– Buy in across all the stakeholders

Page 26: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

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Questions

[email protected]

Page 27: © 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 1 Data Collection and Analysis Supporting Defendable Cost Estimates

© 2013 PRICE Systems, LLC All Rights Reserved | Decades of Cost Management Excellence 27© 2013 Financial Executives International

Backup SlidesData Collection and Analysis Supporting Defendable Cost Estimates

Arlene Minkiewicz, Chief ScientistPRICE Systems, [email protected]