NPD 1000.5 NASA Cost-Risk Directive
Just about hot off the presses (January 2009) is NASA’s cost risk directive.
The directive defines many things with potentially the most interesting being the requirement for joint cost / schedule probability.
Wikipedia has a nice section on joint probability.
Section h is included below… This is causing much stir in the cost communities. Feel free to submit your comments on this topic.
h. Base programs and projects involved in space flight and information technology per NPR 7120.5, NASA Space Flight Program and Project Management Requirements, and NPR 7120.7, NASA Information Technology and Institutional Infrastructure Program and Project Management Requirements on the following:
(1) For implementation of each major program segment (e.g., Constellation- -full ISS capability, lunar exploration, etc.), programs and projects are to be baselined or rebaselined and budgeted based on a joint cost and schedule probabilistic analysis developed by the program or project in accordance with the following:
(a) Programs are to be baselined or rebaselined and budgeted at a confidence level of 70 percent or the level approved by the decision authority of the responsible Agency-level management council. For a 70 percent confidence level, this is the point on the joint cost and schedule probability distribution where there is a 70 percent probability that the project will be completed at or lower than the estimated amount and at or before the projected schedule. The basis for a confidence level less than 70 percent is to be formally documented.
(b) Projects are to be baselined or rebaselined and budgeted at a confidence level consistent with the program’s confidence level.
(2) As a minimum, projects are to be funded at a level that is equivalent to a confidence level of 50 percent or as approved by the decision authority of the responsible management council.
(3) Joint cost and schedule confidence levels are to be developed and maintained for the life cycle cost and schedule associated with the initial lifecycle baselines (e.g., for space flight programs and projects baselines established at KDP-1 or KDP-C).
(a) The initial life cycle baselines may include development of an initial operational capability, initial operations, and sustaining engineering consistent with the definition of the content of the life cycle, along with the traditional development effort.
(b) The cost estimating methodology used for operational phases may be different than those used for other portions of the lifecycle. The operations phase methodology will be reviewed and utilized as a component of the integrated program/project lifecycle confidence level calculations.
(4) Programs and projects that are in extended operational phases are generally not required to develop or maintain confidence level estimates. The adequacies of budget requests for extended operational phases are to be demonstrated and evaluated through the annual budget cycle processes. The Agency policy on joint cost and schedule confidence level estimating applies to significant developments related to new or upgraded capabilities included in extended operations.
(5) The program’s or project’s proposed cost and schedule baseline are to be assessed by an independent review team. The program or project is to present and justify its resulting cost and schedule to the decision authority of the responsible Agency-level management council. The independent review team is to discuss with the decision authority its key concerns with the plans and baselines proposed by the program or project.
(6) Commitments made to organizations outside NASA are to be based on the budgeted cost and schedule associated with the confidence level approved by the decision authority of the responsible Agency-level management council.
(7) Programs and projects are to be annually reviewed by the responsible Mission Directorate or Mission Support Office to confirm to the decision authority of the responsible Agency-level management council that their current baseline life-cycle cost estimates and funding strategy and the annual NASA budget submissions are consistent. Significant changes to funding strategy are to be reviewed with and approved by the decision authority of the responsible Agency-level management council.
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