Heuristics for Systems Engineering Cost Estimation
Dr. Ricardo Valerdi of MIT sent me a pre-publication copy of his upcoming IEEE article. Here is the abstract:
“Engineering cannot wait until all phenomena are explained. Engineers may work effectively, often for centuries, with heuristics. This paper provides thirty one heuristics that have been inspired by the development and application of a systems engineering cost estimation model. The objective of this paper is to present such heuristics in a simple manner so that they can benefit systems engineering researchers and practitioners that develop, calibrate, and use cost models.”
I enjoyed the article (as I do with pretty much everything Ricardo produces). Such simple truths. A few heuristics quoted from the paper follow:
“Don’t assume the original statement of the problem is necessarily the best, or even the right one.”
“Let the available data drive the application boundaries of the model.”
“Design the rating scale according to the phenomenon being modeled.”
The full article is available, as provided by Ricardo here: “Heuristics for Systems Engineering Cost Estimation.”
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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SEER-H Electro Optical Sensor Estimation Validation
If you estimate Electro Optical Sensors you will know what a challenge it can be. That is why SEER-H’s ElectroOptical Sensor model was developed. The following is feedback from a user: SEER-H EOS was within 6% of actuals and they thought they could have gotten even closer had they answered all the questions instead of just the first three. The report follows:
A confirmation of the SpyGlass EOS estimating tool and platform influence factors.
I received a recent Government Procurement announcement for one of the systems in the EO Sensor model database that provided the the unit’s cost and procurement history. The sensor is one of the projects in the CostIQ library. I loaded the the procurement info into the CostIQ SEER-H EOS project i.e. prior units, quantity buy and learning curve. SEER-H EOS projected a production cost of $487,722 and the actual Government procurement cost was $458,000, within 6% of the actual. Note: I had only reset the 3 parameters noted above.
I would expect if I were to do a detail analysis of the procurement/procurement history and tweaked SEER-H EOS the results would even more closely matched the actual procurement cost.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Manufacturing Revolution, Product Development, And Cost Analysis
Jim Ryan of Computer Aid pointed out, during the SEER / Tracer alliance conference, that the manufacturing revolution was able to provide continuous cost reductions and dramatically lower costs. He had examples of:
- Steel 8 hours / ton vs. 25
- GM: 28 hours per car vs. 100
- GE: Constant stream of 10% per year cost reductions
- Motorola, Et Al: Six sigma 3.4 failures per million
The way this was achieved:
- Measure like crazy
- Establish aggressive targets
- Use data to make decisions
- Recognize and reward accomplishments and progress
- Create a learning culture
- Treasure every cycle of learning
Jim points out that all these approaches apply directly to information technology but… we have not seen the revolution occur. He showed how IT productivity has remained flat or slightly declining over the years.
Jim also pointed out that productivity between the 1st and 4th quartile is about 6 times higher than the first quartile
The core principals of the IT revolution are:
- Defined Standard Repeatable Processes
- Process, Performance Product Metrics
- Quality Focus (Quality checks early, not just checklists at the end… code reviews, design reviews)
- Standard cost model…
- End to End process management
- Metrics
- Continuous Improvement
Jim has seen a 50% cost reduction in the work using these approaches within Computer Aid. These are supported by Tracer.
I (Dan) will be speaking on estimate maturity and how Similar results can be achieved by focusing on estimating process maturity. Estimating process maturity should be part of a mature project management process.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Acquisition Reform (WSARA) Webinar Discusses Lessons Learned and Way Forward
If you are interested in government acquisition reform be sure to register for this webinar. Bob Hunt, Galorath VP of Services, was a senior Pentagon official the last time around and will share both what was learned from before and how to apply these to the current WSARA (Weapons System Acquisition Reform Act). Here is the webinar invitation.
Acquisition Reform (WSARA) And How It Impacts Your Estimations: Looking Forward And Lessons Learned
Weapons systems acquisition reform has been a recurring topic within the Department of Defense for many years.
Mr. Bob Hunt, Galorath’s V.P. of Professional Services, was a Senior Pentagon official during the previous Acquisition Reform initiatives. He has since been active in the contractor community. Mr. Hunt will offer a unique perspective on how these acquisition reforms will impact both the Government and the contractor estimating communities.
This WebEx will discuss the unique implications of the latest reform on the cost and schedule estimating process, including:
• Cost Assessment & Program Evaluation
• Directors of DT&E and Systems Engineering Performance Assessments & Root Cause Analysis
• Assessment of Technology Maturity
• Trade-Offs in Cost, Schedule and Performance
• Critical Cost Growth in MDAPs
• Earned Value Management
• Required Reports
• Cost Assessment & Program Evaluation
• How some of the SEER applications can be advantageously applied for Pre-milestone A estimates
• And much more!
Much (or some) of this has been tried before, e.g. Goldwater-Nichols Department of Defense Reorganization Act of 1986; also discussed in “The Cost Analysis Improvement Group: A History” by Srull, Margolis, and McNicol. WSARA is being driven by the continued and “sometimes surprising growth” in the cost and schedule of Major Defense Acquisition Programs (MDAPs).
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Date and Time
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March 9, 2010
8:30 am, Pacific Standard Time (GMT -07:00, San Francisco)
11:30 am, Eastern Standard Time (GMT -05:00, New York)
4:30 pm, London, England
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Presenter
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Bob HuntVP of Services, Galorath Incorporated
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To register for the online event
——————————————————-
This complimentary event requires registration with a corporate email address.
1. Go to https://galorathevents.webex.com/galorathevents/onstage/g.php?t=a&d=669660618
2. Click “Register”.
3. On the registration form, enter your information and then click “Submit”.
Once the host approves your enrollment, you will receive a confirmation email message with instructions on how to join the event
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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DoD Contractor Estimating Systems Deficiencies Can Withhold 10%
A draft rule for business systems has been posted by the Government allowing the withholding of 10% of payments for each of six systems, with a maximum of 50% withholdings. These systems include contractor business systems including 1) estimating, 2) purchasing, 3) accounting, 4) earned value, 5) property and 6) material management.
In 2009 the congressionally chartered Commission on Wartime Contracting stated in its June 2009 interim report to Congress that:
“Weak control systems increase the risk of unallowable and unreasonable costs on government contracts”
Comments will be accepted until March 16, 2010. Email to dfars@osd.mil with subject DFARS Case 2009-D038.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Improving Earned Value With Statistics
I attended a very interesting session presented by Eric Druker and Dan Demangos of Booz Allen Hamilton and Richard Coleman of Northrop Grumman Information Systems, at the Department of the Navy Cost Analysis Symposium (DONCAS) last week covering improving Earned Value (EVM) analysis with statistics. The speakers covered many of the common points regarding EVM weaknesses and showed some work they had done in helping solve some of these issues.
I found it interesting that SEER-SEM’s Parametric Progress analysis solves the same problems by looking at EVM type data and parametrics in concert.
The Problem Statement from the briefing included:
- Currently, the traditional Earned Value Management calculations suffer from several shortcomings that lessen their viability as a cost estimating tool
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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More Resources For Cost Engineering
1. The Association for the Advancement of Cost Analysis (AACE) has a cost estimating library of publications that may be purchased.
2. NAVSEA Cost Estimating Handbook, 2005.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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DoD Releases Reliability, Availability, Maintainability, and Cost Rationale Report Manual
I received notification of the new manual including Cost Rationale along with reliability, availability, and maintainability. This revision adds cost to the previous reliability, availability, maintainability document. Here is the email announcement:
The Office of the Secretary of Defense and the Joint Staff collaborated on the Reliability, Availability, Maintainability-Cost (RAM-C) Report Manual to assist combat developers, project managers, and engineers to design RAM into systems early in a program. The manual supports life cycle implementation of the Sustainment metric, for which the Chairman of the Joint Chiefs of Staff (CJCS) issued new guidance in May 2007. The Sustainment metric consists of an Availability Key Performance Parameter (KPP) and two supporting Key Systems Attributes (KSAs): Reliability and Ownership Cost. The CJCS guidance requires programs under development to create a balance between RAM performance in the field and the related costs of providing that performance-a distinct paradigm shift within the acquisition community that, once fully implemented, should result in improved value for major acquisition programs.
http://www.acq.osd.mil/sse/docs/DoD-RAM-C-Manual.pdf
Additionally the manual discusses ownership cost as summarized below:
“Ownership Cost KSA. Ownership Cost provides balance to the sustainment solution by ensuring that the Operations and Support (O&S) costs associated with availability (e.g., maintenance, spares, fuel, support.) are considered in making program decisions. For consistency and to capitalize on existing efforts in this area, the Cost Analysis Improvement Group O&S Cost Estimating Structure will be used in support of this KSA. (See the structure at the following website: http://dcarc.pae.osd.mil/reference/osd_ces/ ndex.aspx). Appropriate sections of this document cover the specific elements involved in cost estimation.”
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.