Docstoc

Cost Estimation

Document Sample
Cost Estimation Powered By Docstoc
					Cost Estimation


   March 14, 2007
               Project Environment
• Increased emphasis on accurate cost estimates
  – Public demand that federal spending be controlled
  – NASA
     •   Increased oversight by Congress and OMB
     •   Setting cost caps on all major activities
     •   Increased competition
     •   Established conditions for Project Cancellation Review
          – required when any project exceeds its cost cap by 20%
          – generally called when any competitively selected mission exceeds
            its cost cap
   Phase A Cost Estimation Process
                                                                    Organizational
                    Engineering Cost
                                                                    Commitment
                      Estimation
                                                                       Process

                                                          Formal
                                        Cost Estimate                 Proposal
                                                           Cost
                                        Reconciliation               Preparation
                                                         Estimate
  Cost
Guidelines         Project Management
Required             Cost Estimation
 Inputs
                                                                      Proposal
                                                                       Review


                                                 ICE*
                    Independent Cost
                                                 Cost
                       Estimation
                                                Report




*ICE: Independent cost estimate
                   Definitions

• Engineering or Grass-roots cost estimate
  – Project Manager defines the boundaries
  – Done by the people who do the work
• Project Management cost estimate
  – Generally, a top down estimate based on parametric
    models or high-level analogies
• Independent cost estimate
  – Performed by people outside the project
  – Generally, using a different set of parametric models
                      Cost Uncertainty
• Pre-Phase A (Step 1)
   – General reliance on project management cost estimation
   – Grass-roots performed for high risk components
   – Yearly or quarterly granularity
• Phase A (Step 2)
   –   Detailed grass-roots estimation of entire project
   –   Monthly granularity
   –   Multiple cycles
   –   Multiple independent estimates obtained
   –   Cost impact of descope options quantified
   –   Organizational review and commitment
• Phase B
   –   Requirements baselined
   –   Preliminary technical design complete
   –   Integrated schedule with weekly granularity
   –   Project costs locked down by Confirmation Review
  Attributes of a Good Cost Estimate
• Developed at lowest WBS level
• Aligned with integrated schedule
• Grass-roots estimation performed by cognizant
  engineers with sound basis of estimate
• Based on validated historical data
• Identifies cost drivers and risk
• Estimates uncertainty
• Validated with several independent models
• Well documented work content and basis of estimate
              Grass Roots Estimation
• Collect and review cost-related documents (cost guidelines)
   – Assumptions, schedule, WBS, spares philosophy, hardware flow,
     review requirements, etc.
• Divide project into small work elements
   – Prepare cost estimate for each work element
      •   Labor
      •   Services (facilities, fabrication, etc)
      •   Procurements
      •   Travel
   – Apply burden rates
   – Enter data into a common costing tool to produce cost accounts for
     work elements
• Review integrated estimate with technical team
• Validate estimate by running models
• Baselined when the Project and Implementing
  Organizations agree on the scope, schedule, and cost
                       Cost Stability
• Keys to stable cost estimates:
  – Early requirements definition and freeze
  – Good planning
      • Detailed cost guidelines by lowest level WBS
      • Defined assumptions
  –   Credible basis of estimate
  –   Clear accountability for implementation responsibility
  –   Measurable metrics (milestones, rec/dels)
  –   Consistent tracking of status vs plan
  –   Early mitigation of critical path and high risk accounts
  Common Causes of Cost Growth
• Incomplete project definition
• Requirements creeep
• Project inheritance benefits not realized
• Inadequate margins
• Inability to make timely descope decisions
• New technology not ready
• Rec/dels: performance, quality, and schedule slip
   – Poor ICDs, communication and/or teaming arrangement
   – Late product deliverables
• Underestimated software development
• Budget profile mismatched with expenditures needs
                   Cost Risk
• Identified and assessed at the lowest appropriate
  level of the WBS
• Each element should be ranked both by impact
  and the probability of occurrence
• Develop budget estimate for included items
• Project develops and tracks a cost lien lists

• Validated models can also be used to provide a
  probabilistic model of cost to go
                                        Cost Distribution Function
                                                          Mission Cost CDF
                                                       (Mean & Mean +/- StdDev)
                                   1

                                  0.9
Pr{mission cost < Mission Cost}




                                  0.8

                                  0.7

                                  0.6

                                  0.5

                                  0.4

                                  0.3

                                  0.2

                                  0.1

                                   0
                                   $180.0   $280.0   $380.0      $480.0    $580.0       $680.0   $780.0   $880.0
                                                              Total Mission Cost ($M)
                    Cost Reserves
• Generally identified/quantified at the subsystem level
• Basis
  –   Heritage
  –   Degree of modification
  –   Complexity
  –   Is the item on the critical path?
  –   Is new development or technology required?
  –   Past performance
  –   Are long-lead procurements involved?
  –   Is an iterative test and retest program required?
  –   Availability of people and facilities
JPL Project Cost Past Performance
                                       JPL Projects - Past Performance
                                      Cost Change from Original Budget
             600                                                                                         60%
                        55%                           Average Project                              15%
             500                                      Increase is 15%                                    50%
                                                                                37%
             400                                                                                         40%
                                                            20%         3%
$Ms (FY03)




             300                                                                                         30%
                              -3%                 1%                                         17%
             200                                                                                         20%
                                        6%

             100                                                                                         10%

               0                                                                                         0%
                    1         2         3         4          5          6        7           8      9
             -100                                                                                        -10%
                                    Original Budget      Cost Change         % Cost Change
             LMA Contract Past Performance
                                   LMA Contracts - Past Performance
                                     Cost Change from Initial Cost
             140                                                                                   120%
                                                     Average Contract
                                                                                             29%
                                                      Increase is 26%
             120                                                                                   100%
                                                                             29%
                                                                                     11%
             100
                                    112%                                                           80%
                                                            42%
$Ms (FY03)




              80
                                               32%                      0%                         60%
              60
                         17%                                                                       40%
              40
                   17%
              20                                                                                   20%

               0                                                                                   0%
                   1      2             3        4          5        6        7        8      9
                               Initial Cost ($M)       Cost Change ($M)      % Cost Change
                          Budget Reserves

   Budget
   Reserves       30%           30%            25%           20%          20%          10%
     (%)



    Flight      Proposals—     Proposals-      Project/                    Start      Ship to
   Missions/     Step-1 &/or   Step-2 &/or   Instrument      Project/        of       Launch
    Flight     Instrument AO Instrument AO      PDR        Instrument     ATLO/        Site/
  Experiment    (Pre-A-to-A      (A-to-B     (B-to-C/D        CDR       Instrument   Deliver to
   Projects      Transition)   Transition)   Transition)                   I&T        ATLO



Definitions:
Budget Reserve = {Unencumbered Budget Reserve/Estimated Cost to Go} x 100%
Total Budget = Estimated Cost to Go + Unencumbered Budget Reserve
Notes:
1. Cost to Go includes the funded schedule margin, but excludes the launch vehicle costs
          Historical Project Cost Analysis
                    Example             Phase A   Phase B   Phase C    Fab      ATLO
All Inherited       MGS                   1%        4%       46%       17%       32%
Technology                               (0-1)     (0-5)    (30-72)   (11-20)   (11-50)
New Engineering     Stardust,             3%        7%       35%       17%       38%
                    Genesis              (0-5)     (3-8)    (29-52)   (13-28)   (27-50)
New Technology      CloudSAT              4%         8%      27%       33%       28%
                    GRACE               (0-10)     (5-17)   (12-43)   (14-63)   (9-57)
Moderately Complex Magellan               3%        7%       35%       17%       38%
Payload with New   Odyssey               (0-5)     (3-8)    (29-52)   (13-28)   (27-50)
Engineering        Phoenix
Moderately Complex Pathfinder, Deep       4%         8%      27%       33%       28%
Payload with New   Impact, MER          (0-10)     (5-17)   (12-43)   (14-63)   (9-57)
Technology
Highly Complex      Mars Observer         3%         7%      25%       43%       22%
Payload with New    Voyager              (0-3)     (4-10)   (17-32)   (27-49)   (12-42)
Engineering
Highly Complex      Galileo, Cassini,     3%         7%      25%       43%       22%
Payload with New    MSL                  (0-3)     (4-10)   (17-32)   (27-49)   (12-42)
Technology
Mars Pathfinder Cost Data (FY95$)
   Project Management               7.12
   Mission System Development       9.98
   Lander Flight System            135.4
   Sojourner Rover                   25.0
   Science & Instruments             13.8
   Launch Vehicle                    50.3
   Mission Operations/Data Analysis 13.9
   DSN Support                       0.7
   Other                             9.3
   Project Total                    265.5
Project Level:                                  40.6

Program Mgmt/Sys Engineering
                                      17.
                                            2          Stardust
                                      19.
S/C Integration, Assy & Test
Launch Checkout and Orbital Ops Spt   4.2
                                            1          Cost Data
Spacecraft:
Attitude Determination & Control      4.6
                                                40.4    (FY97$)
Propulsion                            2.7
Electrical Power                      5.9
Telemetry, Tracking & Command/Data    17.
    Handling                                5
Structure, Interstage Adapter         8.9
Thermal Control                       0.7
Other:                                          81.9
                                      24.
Reserves                                    2
E/PO                                  5.5
                                      15.
Science & Data Analysis                     3
Payload                               7.4
Navigation Camera                     2.6
Particle Flux Monitor                 0.5
Genesis Spacecraft Cost Data
                           FY99$
        Spacecraft          58.6
        Subsystems          30.4
          C&DH              3.3
          Electrical        6.6
          Telecom           2.7
          Structures        5.1
          Thermal           0.8
          Propulsion        2.6
          ACS               5.2
          Software          4.0
        Project Mgmt        7.8
        Systems Eng         5.2
        ATLO                12.5
        Mission Planning    2.6
               References

• JPL Project Management Training Notes
• NASA Project Management and Advanced
  Project Management Training Notes
• NASA Project Leadership Training Notes
• SMAD III Textbook, Chapter 20

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:17
posted:12/9/2011
language:English
pages:22