I saw a demo today of our new labor rate calculator.  It takes in various labor rate drivers and computes a viable labor rate.   It even evaluates the cost of equipment, electricity, floor space, insurance, etc.

This is a great step forward in the “should cost” and will cost for product manufacturing.  Buying organizations can describe the problem and see what a fair labor rate for the region, country, machine, etc.  Mixed currencies are supported as well.

The following is a small example of the kinds of information that can be specified  In this case it is configured for manufacturing.

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Embedded design integration is the integration of all efforts (hardware, software, etc.) within an system that is typically dedicated to perform one or a few functions. Typically there are real-time computing requirements involved in these types of designs. Integration costs can at times become a considerable portion of the overall cost on a project. The continuous introduction of newer technologies continue to drive up integration efforts.

Use of old factors that estimated Integration Assembly and Test ( IAT) as a function of overall top effort were weak before but now can produce dangerously low estimates. Part of the reason why IAT costs have classically been painful can be attributed to the fact that it is at this stage where the complicate blend of hardware to hardware or hardware to software comes to a point and must all meet specifications at once! What worked in recent simulations or in isolated tests now becomes painfully clear won’t work at a combined level. This invariably leads to the continuous waves of adjustments, partial redesigns, re-architecting, retests in a desperate effort to close in on the minimum requirements.

For estimation purposes, careful consideration has to be given to the work break down structure of the embedded systems being modeled to ensure adequate estimation of integration effort and risk are covered at all levels. For instance, just applying a 10-35% IAT factor at an enclosure level in order to capture integration of all board and SW underneath it might be okay for some simple systems but not newer technologies which bring along extra complexities. An example is where the design involves custom components (ASICs, FPGAs, etc) which in turn have embedded processors within their fabrics. In these System on a Chip (SOC) designs, it make sense to break out the cost of integrating the SW onto the chip itself. At the next level one could add another rollup to cover the integration of SW to the main board running a general purpose processor, etc.

Another example could be designs that involve multiple separate custom chips running on the board since there might be a significant effort to get these chips to work with each other.

In our SEER H hardware model, we break out these sections with a separate roll up to calculate the IAT. At this point, we take care to set the parameters that describe the complexity of the effort and the experience of the folks doing the work. If this type of design is done often, we would create a knowledgebase (default template) to capture and standardize the estimation approach. As can be seen, many designs can involve layers of IAT which in turn can drive up the final overall IAT numbers considerably beyond 35%.

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I recently saw a presentation by Bernie Fox of Rand regarding guidelines and metrics for assessing space system cost estimates.  Very interesting presentation (if you are interested in space systems)

The paper includes:

•  Average costs and ranges for space vehicles, subsystems, and components for crosschecks.. Powerful
• Common issues in estimating the cost of space programs
• A space system specific portions of Military Handbook 881b (MIL-HDBK-881b)
• The National Reconnaissance Office WBS for more detailed breakdowns
• Cost / Risk Analysis

If you are involved in space systems you should look at this document

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Follow this link to see some of the estimating united papers.� it was a great conference, full of useful information. Talks encompassing cost estimating (cost estimation), value engineering, product design, software, and more.

And thanks again to all the speakers and attendees as well as the hospitality of the Manchester United Football (soccer) club. And the Galorath staff whose diligent efforts made this a great success. Presentations will be available for all to download for the next few months, then will be available as part of the Galorath corporate library.

Galorath Conducts 5th Worldwide Conference on Project Estimation: Estimating United

On March 19th, 2009, Galorath conducted its 5th annual worldwide conference on project estimating. The conference title, Estimating United, was fitting both for its venue and content. The venue was Old Trafford, Manchester, United Kingdom, home of the world famous Manchester United Football Team. The content included presentations in two tracks from a variety of world class company participants, all united in their efforts to improve project estimation practices. Presentations covered a variety of topics in the area of project estimation, planning and control.

In recognition of their contributions to project estimation, two awards were presented at this year’s conference — one to Charles Symonds for his outstanding work and contributions in the field of software estimation and the second to Alan Jones of BAE Systems for his continued efforts to provide both a platform of knowledge for less experienced cost engineers and for his dedication to the Association of Cost Engineers activities to bring to our profession a “tiered approach to accreditation.” They join past recipients of this award which include Raj Roy, Cranfield University; David Reuss, Rolls Royce; and John Henson, AgustaWestland.

The 2nd SEER conference of the 2009 series will be held in El Segundo, CA on October 8th and 9th, 2009.

Presentations

Life Cycle Costing Capability in an International Organisation for Armament Cooperation

OCCAR-EA is an International organisation with full legal personality since 2001. It was created to co-ordinate, control and implement co-operative armament programmes that are assigned to it by the Member States. Today OCCAR is managing 7 Programmes with a total portfolio of 44 billions Euros. OCCAR is clearly tasked from its Convention to identify Cost Effective options to the nations both during Development and Production and for the In Service Phase of a Programme.  In this frame, OCCAR-EA has developed a Life Cycle Costing capability within the general approach of Through Life Management.  This allows the identification of common and cost effective solutions and informs the decision makers on these opportunities. The presentation will show the steps followed to set up this capability and will point out the specifics linked to an international Agency, a snapshot of the process in place, and the types of studies that have been performed.

Chairman’s Welcome and Opening Remarks

Carl Dalton introduces the day’s events, runs through the timings and housekeeping and introduces the Galorath team and the presenters.

The Value of Cost Estimating for Cost Management

Costs are determined in the very early stages of the Product Creation Process. Not using this fact, but only to focus on ‘solving technical puzzles’ or stressing Time-to-Market is a missed opportunity that in the end makes the business less competitive. In many companies Cost estimation can be a very valuable tool for purchasing in determining the “should cost” if only used in this way however cost estimation becomes a “purchasing tool” only.Changing to Target Costing means: Define the Customer Value before development starts, and derive the Target Cost from this. Then start studies to address the economic feasibility of new products, using cost estimation and cost driver analysis. This way cost estimation becomes a strategic decision support tool with less need to repair costs later on.Goof will address the following during his presentation:

• How we used to address costs (not)
• Change to Target Costing
• Role of Cost Estimation for target costing
• Some Examples of Cost Reduction achievements using Cost Estimation

Procurement Costs – Transparency and Assurance

Procured Equipment, Material and Services represents over two thirds of the initial cost of a military air platform and the resulting through life support activity. In the current climate of partnering and price transparency linked to a business environment increasingly focussed on ethical conduct, commercial parametric estimating models can provide confidence for both supplier and customer through open cost modelling based on industry standards of performance.This presentation will outline the current activity at BAE Systems – Military Air Solutions aimed at achieving these goals.

Understanding the Mysteries of MOD Support Costs

The costs incurred during the service life of equipment are a significant proportion of the whole life cost. However, these costs are not well understood and there are inconsistencies within the MOD as to how these are collected, collated and used. These costs are also used within the analysis at Dstl to inform high level Balance of Investment (BOI) decisions and it is therefore imperative that these costs are included as accurately as possible. The Support Costs study, funded by Director Equipment Plans (DEP), was commissioned to address this problem.The presentation will cover how the project team tackled the problem and explore some of the conclusions from the work.

Embedding Galorath’s Estimating Tools into a Project & Programme Management Suite

In this presentation we will show how the Galorath estimating tools have been integrated into Ninth Wave’s Project & Programme Management (PPM) suite.In most PPM products estimates for projects are entered manually and there is no audit trail provided for senior managers to see how the estimate was derived. Ninth Wave has enhanced its PPM suite to be able to generate an estimate automatically into a project by using the Galorath products in a “black box” fashion.The key benefits of this integrated approach are:

• estimating best practice is embedded into project management across the organisation
• drill-down capability to understand key inputs and drivers for an estimate
• ability to model different scenarios with just a couple of mouse clicks
• audit trail provided for all steps associated with generating an estimate

Software Sizing – the weakest link of estimating?

Charles Symons presents data on the performance of the software industry which in certain respects is dreadful. Evidence will be shown suggesting that this poor performance is at least partly due to weaknesses in performance measurements and in estimating. By “estimating”, we mean:

• initial estimation of the product size,
• methods for estimating project effort and duration from the initial size,
• processes by which estimating is integrated with project management,

where the first of these elements is the weakest link (though the third is also often weak).

The talk will then trace the development of methods of sizing software from using SLOC, to Albrecht’s idea of sizing functionality (now the IFPUG method), to the COSMIC method. Charles will briefly compare these methods and show how the COSMIC method overcomes weaknesses of earlier approaches.

What’s New and “Dan Galorath on Estimating”

What’s new and what’s coming in SEER will be featured.Additionally Dan will discuss selections from his blog. Dan will discuss selections from metrics, effectiveness measurement, the real costs of a variety of undertakings, what is ITIL versus ISO 9000, the risk of IT projects, what the assets of failed banks really are worth, and lots more. He weighs in on a wealth of topics both timeless and contemporary.

Computer-aided Business Case Assessment in Engineering Design Education

In all engineering initiatives the only acceptable basis for launching a product development programme is one in which low risk and high return-on-investment in the shortest possible timeline is secured. Up to 80% of the life-cycle cost of most high valued-added engineered products is incurred during the conceptual design phase, and, by the time completion of the design and development stage occurs 95% of the product cost is fixed and most of the development cost is spent. The University of Bristol, Department of Aerospace Engineering, and, the Department of Engineering Mathematics via its Engineering Design degree programme offer many examples of group project orientated education for undergraduates. The major student group projects for academic year 2008/09 include: (1) Airbus UK project “250-passenger Transport Aircraft Optimised for Multi-stop, Long-range Operations; (2) Arup project “Elevated Transport and Entertainment Ride System”; (3) Motorola project “Water Powered Pico Generator for a Mobile Phone Base Station”; (4) Hewlett-Packard project “Personal Carbon Footprint System”; (5) GE Aviation project “Automation of Pitch Control of a Propeller Engine; and, (6) Babcock project “Design Optimisation of a Nuclear Flask ‘Grab’ System”. A review of business case results from the aforementioned student group project work using the Galorath SEER-H cost estimation software will be presented.

Decisions, (Multi-Criterion, Subjective, unbounded), Decisions

The primary objective of this paper is to introduce two alternative methods, Absolute and Empirical Referencing, used to minimize the subjectivity surrounding some of the more crucial processes associated with project management and analysis. The Estimate by Comparison solution developed by Galorath Incorporated will be used as the vehicle to illustrate comparative sizing for the purposes of Parametric Estimation along with a few other more contemporary applications.

Estimation in ERP Environments

• Organisations have ambitious plans when purchasing ERP
• More than 75% believe in quick wins and grand return of investment
• In practice one will go a long way of learning
• 30% – 70% cost reduction is possible
• Therefore one needs a strong strategy in standardisation, developing
• Kknowing the pitfalls and monitoring the principal cost drivers are essential
• Benchmarking and estimating the projects and their environments will bring success
• Example insurance company:
  • Starting up with conventional planning and estimating
  • Gathering facts and figures
  • Switching to ERP environment planning
  • Building up company specific planning data
  • Creating private knowledge base

The 12 Sins of Estimation

Sin is a term used mainly in a religious context to describe an act that violates a moral code of conduct or the state of having committed such a violation. In monotheistic religions, the code of conduct is determined by God. Colloquially, any thought, word, or act considered immoral, harmful, or alternative might be termed “sinful”. Knowingly, and unknowingly, we as estimation experts commit sins in the area of Estimation, leading to harmful effects on the project management, tracking and control. With the premise that not doing wrong things is a way to do the right, the presentation highlights the common sins committed by experts in the field of estimation.Taking into account the current practical realities of business, the presentation explains how we can improve the process of estimation, and how to gather the critical mass required to make change happen in an organization.

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The question was asked “what probability should I estimate at”  The answer follows: Risk is really uncertainty.  So the question becomes how much uncertainty can or should I allow in my project plans.  There are many approaches to this, depending on circumstances including:

What are the consequences of an overrun:  Many large military type programs in the US budget at a 70% or 80% probability.  These kinds of programs are generally large and not well defined at the early planning stages.  They use the higher probability so they don’t have to go back for more budget or schedule as the program progresses.  These programs will generally manage to a 50% probability, using the overage as a buffer for program growth.

Is The Project Fixed Price:  Many programs that must bid on programs at fixed price will initially estimate at a probability like 80% so that they are covered if the project becomes more complicated than their initial looks.  Of course competitive issues may cause them to bid lower.

Is this an in house Project: Many projects will plan at a 50% (most likely) probability.  This allows them to have a tough but achievable plan and if the project runs into difficulty they can adjust.

I recommend managing to the 50% probability… Tough but achievable schedule and effort.

Some projects Estimate at the 20% Probability:  This is a lower cost / schedule plan that can win a contract.  Unfortunately these projects usually overrun.  But they have taken calculated risks.

I once heard of a program that was thrilled that the 1% probability met with their hopes for the program.  So they had a plan with a 99% probability of failure.

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The SEER Estimate By Comparison (formerly SEER-AccuScope) comes in two flavors, the core and the professional.  The professional version allows estimation of anything, such as

• total system cost
• software size
• hardware weight
• system value
• server capacity
• best choice from a set of alternatives

This new feature incorporates sophisticated mathematics for uncertainty and estimation.

For the first year Galorath is providing the professional version to all SEER users.  Beginning the second year the professional functionality will be available as an upgrade.

Galorath recommends using an industrial strength database for an enterprise but will allow Microsoft Access for simple desktop installations.

This feature began shipping with the release of SEER for Software 7.3, in October, 2008.

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