Sustainment Modeling for Project Managers

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					Sustainment Modeling for Project Managers
Daniel W. Miles


The success of many projects has been directly attributed to the initial planning stages of the project.
Most Project Managers enter into projects at various stages of project maturity. This article attempts
to present a successful approach for project managers by employing the Sustainment Model concept.
The sustainment Model will bridge the entry gap and provide the manager an initial starting point.
Like many new and innovative approaches, an understanding of the sustainment concept, its origin
and model development will facilitate the Project Manager’s implementation of the concept. The
article also uses the example of a high-speed security boat to provide a better understanding of the
sustainment concept.

Sustainment of a project is defined as the complete life cycle of the project through the three phases of
sustainment: the Set-Up Phase, the Acquisition Phase, and finally the Operation Support Phase.
Sustainment accounts for the development and costing of all required items necessary for project
success. This includes the identification and development of all documentation, creation of the
acquisition process, the leveraging of all items to achieve a successful project. The model will provide
the manager the ability to step into any phase of a Sustainment based project, review where the project
is, how successful it has been in achieving proposed goals, and provide insight into leveraging the Set-
Up and Acquisition phase decisions necessary to support Operation Support needs.

The Sustainment Model was derived from the Cost Driver Modeling Process first presented in the
ICAFI University Press, Projects and Profits article, “Navigating with the Cost Driver Approach”,
January 2006. The article illustrated the use of the modeling process to derive initiatives to increase
profits. This article is an expanded application of that process.


The Set-Up Phase (Six Steps to Success)

The Set-Up Phase initiates the process by first defining the project system. In the security boat
application, the project system is initially defined as: The Hull; The Trailer to support transportation of
the hull; The Truck to provide delivery of the hull and support off-hull electronics; and The On-Hull
electronics package

It should be noted that additional capabilities should be identified by separate models which simply
provide for reconfiguration of the project system.

In the case of the security boat additional capabilities could include: Weapons Packages; Unmanned
Ariel Vehicle (UAV); UAV launch and retrieval system; SONAR Detection Systems.

Once the system is defined, the first step that is required is the development of a build to print drawing
package. At this point, the media for the drawing package should be carefully reviewed. Many forms of
media exist, therefore, the project manager must decide on a media format that is flexible to
accommodate all aspects of sustainment.




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Although the initial cost is high, electronic media is an accelerator that will afford the project manager
flexibility throughout the sustainment process. Many commercial applications exist and the manager
should choose one that will be maintained in the future by the developer, and can easily interface with
most hardware and software currently available.

Once the build to print drawing package has been developed, the second part of the Set-Up process is to
construct a prototype. The prototype is required not only to demonstrate the performance of the project
but is also used to validate the drawing package. In the case of the security boat, the Project Manager
would need to define the following information:

      The Prototype
        Do I use a Commercial-Off-The Shelf (COTS) Hull or make it up from scratch?
        What construction materials will be used?

      Space and weight requirements would include:
        Fuel storage and delivery;
        Armor (Kevlar or other);
        Mooring;
        Propulsion Power/ Control;
        Batteries/ Solar Charging;
        Electronics (On-Hull/ Off-Hull);
        Communications;
        Navigation;
        Reserve Buoyancy; and
        Coatings;

The third step, the development of support documentation will be required. The owners and operators of
your project will require additional documentation. Your list should contain the following:

      Operations/Operator Manual

      Training Manuals
        Operators
        Trainers

      Maintenance Manuals/Repair Standards
        System Level
        Component Level

The media for support documentation should also be carefully reviewed. The Project Manager should
consider the use of electronic media. This is also considered an accelerator and can be used to leverage
down Operation Support costs. The Project Manager should also take into account the eventual users of
the model designed. Most commercial support documentation uses commercial standards to format their
documents. If the Project Manager believes that a non-commercial application exists, the documentation
should be formatted using those standards. The application of an Interactive Electronic Technical



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Manual (IETM) will facilitate non-commercial sales, since all will require logistics support materials.
The total cost of support documentation development will be recovered by a non-commercial sale.

The fourth step is the establishment of spares/parts supply warehouse. Initially, the in-house parts area
will be sufficient, however, for sustainment, the Project Manager must identify the goal for an estimated
level of sales and future maintenance. He should leverage any resource at his disposal to provide for
storage and shipping. He should consider what personnel as well as storage space needs to be increased.

For the security boat, the Project Manager should procure parts equal in value to one boat, for initial
sparing. One man would be assigned the warehouse. As the number of boats sold increases, the parts
sparing should be increased by one boat value for every ten to twelve boats sold. The manning for the
warehouse should increase by one man per thirty boats. The initial facility should support up to 100
boats; after that a second spares/parts supply warehouse should be considered.

The fifth step is the establishment of a training facility. The training facility is required to support
training required for operation of the project and maintenance. For the security boat, the facility needs to
be a year round site and could be leveraged to support other project functions such as sales, system
upgrade/enhancement development and the staging of new systems. The costs for such a facility would
include:

      Manning;
      Facility leasing costs
      Facility operation costs (utilities, security, etc.);
      Facility training equipment (computers, work benches, tools, test equipment, etc.);
      Simulation modeling programs (supports operational and maintenance training); and
      Consumables (Fuels)

The sixth and final step is the establishment of the sustainment facility. The facility is necessary to
provide activities to support the Acquisition and Operation Support phases. These activities for the
security boat would include:

      Providing system acceptance testing from boat builders (Acquisition);
      Providing system integration and testing prior to delivery (Acquisition);
      Providing warranty repair customer service (Operation Support);
      Providing warranty repairs (Operation Support);
      Providing non-warranty repairs (Operation Support);
      Providing remote diagnostics/system/software upgrades (Operation Support);
      Providing new system development and testing (Acquisition & Operation Support); and
      Providing environmental controls (fuel storage) (Acquisition & Operation Support).
      The costs for such a facility would include:
        Manning (initially two, increasing at a rate of one for every ten (10) security boats);
        Facility leasing costs;
        Facility operation costs (utilities, security, etc.);
        Facility repair equipment (tools, work benches, computers and test equipment);
        Consumables (Fuel); and
        Environmental licenses


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The Acquisition Phase

The project must now move to the Acquisition phase. This phase requires the Project Manager to
establish a production rate, establish the cost of the project and qualify builders of the project.
Establishment of the cost of the item can start with a simple bottom-up approach utilizing the build-to-
print drawing package. The project manager should distribute the package to in-house departments for
quotes and also to outside sources. The Project Manager should qualify at least three outside sources as
well as the in-house departments. A current issue in outsourcing is inheriting your outside sources’
problems. In the example of security boats, schedule delays by a single supplier will cost the Project
Manager not only future sales but also cancellation of current sales. By qualifying multiple outside
sources, the risk of schedule delays will be significantly reduced.

The Project Manager will have the bid process establish the baseline cost of the project as well as
production rates. He will be in a position to resolve any issues with the build-to-print package.
Moreover, he will be able to solicit different views on manufacturing the project and be in a position to
standardize the manufacture process. In the case of the security boat, there are a variety of options and
production rates that can be applied. The builders should be able to support a minimum of one boat a
month. The Project Manager must then choose a production method or methods to achieve the desired
projected production rate. In addition, the Project Manager must assure and follow through on
purchasing some production items from all sources. Outside sources will be more willing to support any
future expansion of this and any future projects if they are receiving orders. However, the in-house
departments may object to outsourcing of any work, as they may feel insecure about their job security.
A balance between in-house and outsourcing of project work will assure the Project Manager avoidance
of unnecessary internal issues.

Qualifying the builders of the project is necessary to achieve the Sustainment Model process. During
this phase the proposed Sustainment personnel will derive acceptance standards for the project as well as
implement quality standards for all builders. In the case of security boats, it is the Sustainment
personnel who will buy the boats from builders. Qualification requirements must be defined and
provided to potential builders with the build-to-print drawing package. The builders’ interpretation of
project acceptance criteria will make or break the project.

Now, the Project Manager is ready to establish a breakeven analysis for the project. All explicit and
implicit costs need to be identified.
The basic explicit costs include the following:

      Build-to-print drawing package costs;
      Prototype Costs;
      Support Documentation Costs;
      Spare/Parts Supply Warehouse (First year operation);
      Training Facility (First year operation);
      Sustainment Facility (First year operation);
      Acquisition of Hulls.

Implicit costs include:

      Cost of Capital (The Project Manager should assume at least 20%)


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Total Sustainment Model for ten (10) to twelve (12) hulls is $K.

The Project Manager must now derive the revenue from each hull, and determine the sales volume
necessary to breakeven using the Total Sustainment Model cost. The revenue and anticipated yearly
sales can be obtained from the marketing department. In the case of the security boat, eleven (11) sales
should be the breakeven point.

Using the “Cost Driver Model”, the breakeven analysis is constructed. In the case of the security boat,
the initial analysis should only consider the sale of the boats. A second analysis should consider leasing
the boats. Due to the function of a security boat, leasing by a client will reduce the need for highly
trained operational and maintenance personnel. If the Project Manager can lease as well as sell his
project, this will also reduce the project breakeven point. In the security boat analysis, this could be as
much as one less boat. Sale and leasing options of a project will benefit both the Project Manager and
the project buyers.

The Operation Support Phase

During the Operation Support phase, the Project Manager now becomes the owner of the supply chain.
He can manage the chain for his company or become a partner of the buyers by providing the
Sustainment functionality. This is essentially the same concept as to having your printed circuit board
(PCB) builders populate and test the boards prior to delivery. At this point, the Project Manager must
develop the execution plan and budget. In the case of the security boat, the total cost needs to be
borrowed to execute the Sustainment plan. Since all the money is not needed initially, a draw account is
recommended.

The Project Manager must now continue to identify cost reducing accelerators to leverage down
acquisition costs, to increase profitability. The “Cost Driver Model” indicates that during the Set-Up
phase a reduction of twenty (20) % is achievable. In the Acquisition, it is possible to reduce costs by ten
(10) % and during the Operation Support phase as much as forty (40) % can be reduced from original
estimates.

Due to the variety of potential projects, the stand-up of the Sustainment facility, fielding of the initial
production level and achievement of the breakeven point vary. Since the completion of the “Six Steps to
Success” of a Sustainment model is hard to determine by a time line, the Project Manager should
consider achievement of the breakeven point as accomplishing the “Six Steps to Success”. The
continuation of the project will initiate with a revision of the execution plan to support continuing
operations and production/sustainment. The Project Manager will again create a new draw account for
the next year/sale for continuing production.

Leverage Everything

Once the Sustainment Model is in operation, the Project Manager will realize that all elements of the
model can become individual profit centers. In the case of the security boats, buyers may want
enhancements to their boats, thereby creating a secondary use for the prototype in the implementation
and demonstration of new capabilities, which can also be made available to other boat buyers. The
continuing use of the prototype for validation of changes will reduce future development costs.
The initial cost of required documentation has been paid for in year one, and any changes required by


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buyers can be easily accomplished. The spare/parts supply warehouse, will initially respond to warranty
repairs, however, it will also support non-warranty repairs, which increases profitability. The warehouse
can also provide a Depot level of logistics for non-commercial buyers. The training facility can also
support the training of additional operators/maintenance personnel as well as refresher training for
original operators/maintenance personnel required by buyers. The sustainment facility will support
warranty as well as non-warranty inquiries, which will lead eventually to increased sales. On line
diagnostics will significantly reduce warranty repair time and costs for both the Project Manager and
the buyer. The General Physics Corporation is currently developing a Virtual Maintenance Engineering
Platform (VMEP) to accomplish this goal. The VMEP is another example of a potential cost
reduction initiative.

Conclusion

This article has just outlined how the Sustainment Model can be successfully implemented by a Project
Manager to increase the profitability of his project. Additional advice offered is simple. First, show a
passion for your project when discussing it. This will show buyers and your management that you are
committed to your project and its success. Second, never stop looking for cost reducing initiatives. The
successful Project Manager will clone them into other projects. Finally, always claim ownership of your
project. The Project Managers continued success is based on his belief in his project and its
applications. The author, through submittal of this article, claims ownership for the Sustainment Model
presented.


About the Author
Mr. Daniel W. Miles is a Senior Project Control Specialist at General Physics Corporation, an
Associate Professor at Albertus Magnus College, New Haven, CT. and an Associate Professor at the
University of New Haven, West Haven, CT. teaching in the areas of Economics, Statistics and
Industrial Engineering. The author can be reached at dmiles@gpworldwide.com.


Source Information
This article was originally published in The Institute of Charted Financial Analysts of India (ICAFI)
University Press publication Projects & Profits, July 2007.
www.icafi.org/study_centers.asp




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