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									                   Survey of Cost Risk Analysis Practices in the U.S. Aerospace Industry
Thank you for participating in this important survey of U.S. Aerospace cost risk analysis practices. Your inputs are important to a
comprehensive understanding of Aerospace Industry cost risk analysis across the United States. Responses are welcome from
all in the U.S. Aerospace Industry … Government, Contractor, University, Consultant, or Support Contractor.


Cost risk assessment aids Government and Contractor business decisions and increases cost realism. For the survey results to
be comprehensive, we are contacting members of ISPA, SCEA, and SSCAG. Your participation in this web-based survey (10-15
minutes) will increase the breadth and depth of conclusions.

This survey considerably expands on the initial one taken at the 1998 Toronto SCEA-SSCAG conference. The results will
compare the 1998 and 2008 surveys, and hopefully depict positive trends. Survey tallies and analyses will be presented as a
paper at ISPA-SCEA and SSCAG conferences (Netherlands, May‟08), and the SCEA-ISPA conference in (SoCal, June‟08). SCEA
plans to publish the results in the Estimator (Fall‟08).

    The survey requests 3 types of data entry ...
        x       Multiple choice … please mark one or more boxes, with any character
                Fill-in-the-blank ... open ended questions
            %   Percent of time applicable to your organization

    Your percent entries are auto-summed to help you reach 100%
            %   Survey automatically calculates sum of previous entries. No entry here.

    Please do not add new rows or columns.
    Thank you for taking a few minutes of your valuable time to fill out the survey!
    Please send survey directly to Hollis Black at … hollis.m.black@boeing.com                                      Contact at (256) 461 - 2998



   In order to avoid duplication and know the survey breadth, we request identity
    information. We will not, however, attribute any of your responses to you or
    your specific organization without your express consent.


               Your name - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
               Organization - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
               E-mail - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
               Phone - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - >

   What general organizations do you participate in?
     x    (Please mark all that apply .)
         Government
         Industry – Prime Contractor
         Industry – Support Contractor
         University
         Consulting Firm
         Independent Consultant
         CETA
         FFRDC
         Other

   What customers do you support?
     x    (Please mark all that apply .)
         Army
         Navy
         Air Force
         Marines
         NASA
         DoD Other
         Civil other
         Government Other




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            Commercial
            Foreign Government
            Other

   What Organizations or Societies do you participate in?
     x    (Please mark all that apply .)
         SCEA
         ISPA
         SSCAG
         NASA / CASG
         MORS
         DoDCAS Other
         ACOST
         SCAF
         EACE
         NAA – IMA
         AIAA


1   WHEN - Under which circumstances does your organization develop cost risk
    analysis?
                                                                                                        Key Issue
      x    (Please mark all that apply .)
          All projects, regardless of size
          Projects exceeding minimum $ threshold. Please specify limit
          Projects with significant technical risk
          Projects with significant schedule risk
          Ventures without government funding guarantees („commercial‟)
          International projects with difficult terms & conditions
          Customer requirement (RFP or contract deliverable)
          Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >

2   WHEN - What percent of the time (i.e., "how often") does your organization
    quantify cost risk for these types of estimates?
         % Rough Order of Magnitude (ROM's) for concept studies
         % Major design trades
         % Proposal -- DDT&E/EMD
         % Proposal -- Production
         % Proposal -- Operations-sustaining
         % Independent Cost Estimates (ICE's)


3   BENEFITS - Which of the following does your organization see as key benefits
    of ‘ Cost Risk Analysis?‟
                                                                                                          Key Issue
      x    (Please mark all that apply .)
           Probability of achieving performance within cost (before or after award)
           Evaluate sufficiency of mgmt reserve (EACs after contract award)
           Manage, prioritize, and mitigate program risks
           Basis of design-cost trades (i.e., sensitivity analysis)
           Basis of business decisions (bid/no-bid, make/buy, relocation, teaming)
           To meet customer requirement
           Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >

4   WHO - What functional organization is most responsible for performing cost
    risk analysis?
       x   (Please mark just one)
          Finance cost estimating and analysis
          Engineering cost estimating
          Management
          Not assigned specifically (all organizations)
          Not applicable. Cost risk analysis not performed.

5
    WHEN - Is “Cost Risk Analysis” a separate task performed after the cost
    estimate is complete? Or is it an integral part of the cost estimating process?



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       x       (Please mark just one)
               Always integrated with the baseline cost estimate
               Partially integrated
               Always a separate task after estimate is complete

6    WHAT - Which of the following are included in your organization‟s assessment
     of Cost Risk?
                                                                            Key Issue
       x   (Please mark all that apply .)
          Technical risk and 5x5 matrix (only)
          Technical, schedule, sub-contract, and business risks
          Estimating error (variation in historical cost relationships, unknowns)
          Cost to mitigate (avoid, handle, lessen) risk
          Cost of absorbing an unmitigated risk
          Opportunities to reduce cost (“affordability,” “lean”, etc.)

7    METHOD - Please identify the methods your organization typically uses to
     perform cost risk analysis. Indicate percent of time each used.
         % Analytic … method of moments … distribution based
         % Monte Carlo simulation
           % Total should add to 100%


8    TOOLS - Please identify the tools your organization typically uses to perform
     cost risk analysis. Indicate percent of time each used.
           % ACE (RI$K)
           % @RISK
           % Crystal Ball
           % FRISK / NAFCOM
           % In-house (customized)
           % ProAct
           % Risk+
           % SEER
           % TruePlanning (PRICE)
           % None
           %   Other … please write in to the right          - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   >
           % Total should add to 100%


9    TOOL ISSUES - What risk analysis tools need to be improved? Please write-in
     the tool name (e.g., ACE-IT, SEER, @RISK, PRICE, NAFCOM, Crystal Ball, etc.)
     and needed improvement.)
     - SEER improvement needed - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
     - PRICE improvement needed - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
                                                                - - - - - -
     - NAFCOM improvement needed - - - - - - - - - - - - - - Key Issue- - - - - - - - - >
     - Crystal Ball improvement needed - - - - - - - - - - - - - - - - - - - - - - - - - - - >
     - @RISK improvement needed          - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ->
     - ACE-IT improvement needed         - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ->


10
     METHOD - How does your organization typically estimate cost uncertainties
     (low-high range or standard deviation)? Indicate percent of time each used.
         % Statistical analysis from history                             Key Issue
         % Team consensus, using guided survey (subjective)
         % Team consensus, subjective
         % One analyst, subjective
           % Total should add to 100%


11 DISPLAY - How do you display the outcome of cost risk assessment to
   management? Please indicate percent of time each used (total 100%).
      % Cum-S curve
      % PDF (Probability Density Function )
      % Low-high risk range
      % Tornado chart (plus-minus sensitivity)
      % Statistics (mean and standard deviation)




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          %   Other … please write in to the right        - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   >
          % Total should add to 100%


12 LEVEL - For what program level do you typically report risk results?
      % Total program
      % WBS or cost element
      % Phase (DDT&E, LRIP, Production, O&S)
          % Total should add to 100%


13 DISTRIBUTIONS - Analysts tend to prefer certain types of probability
   distributions. What distribution type does your organization find best fits
   historical data? Please indicate percent of time each is used (total 100%).
       % Triangular
       % Log-normal
       % Beta
       % Weibull
       % Trapezoidal
       % Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
          % Total should add to 100%


14
     SPECIALIZED - Is cost risk analysis considered to be a highly specialized skill?
                                                                                            Key Issue
      x   (Please mark just one)
         Yes, high specialized, only a few can do it.
         Somewhat specialized, many can do it.
         No, not highly specialized, all should be able to do it.
         Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >

15 DIFFICULTY - Is cost risk analysis difficult?
     x   (Please mark just one)
        Yes
        Sometimes
        No
        Other … please write in to the right - - - -              - - - - - - - - - - - - - - - - - - - - - - - - - -   >

16 TRAINING - Does your organization provide training in cost risk analysis?
    x    (Please mark just one)
        Yes, internal training
        Yes, external training
        Yes, both internal and external training
        Informally only, no formal training
        No training
        Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >

17 TRAINING - What training courses in cost risk analysis have you found most
   effective?

18 REFERENCES - What reference documents do you find most helpful in
   conducting cost risk analysis?

19 MITIGATION - How does your organization mitigate unacceptably high program
   risks (technical, performance, schedule, etc.)? Please indicate percent of
   time each is used (total 100%).                                                                         Key Issue
       % Improve design at a higher cost (redundancy, reliability, etc.)
       % Increase IR&D targeted at technical hurdles (TRLs)
       % Further test developing technologies
       % Re-scope requirement and develop mitigation plan.
       % Slow project and/or wait for affordability technology in risk areas
       % Revised design/fab processes and environment
       % Press on in hope that supporting technologies will mature in time
       % Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >
          % Total should add to 100%




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20
     RISK MANAGEMENT - To what extent does your organization integrate cost
     risk analysis into the overall Risk Mgmt process? Please indicate approximate
     percent of time programs reach these 5 maturity levels (total 100%).      Key Issue
           1 - Cost risks are sometimes assessed and quantified in the estimating
           process.
          %
              2 - Cost risk ranges (low-likely-high) are occasionally provided.
          %
              3 - High probability risks are quantified in cost estimates; or tracked in a
              risk mitigation plan that effectively reduces risk to moderate/low.
          %
              4 - Cost Risk Analysis has been integrated with Risk Mgmt Plans; is
          %
              tracked and managed by the program.
              5 - Cost Risk Analysis has been integrated with Risk Mgmt Plans;   is
              tracked and managed by the program; and is evident in proposals, EVMS,
              and EACs to support decision making.
          %

          %   Other … please write in to the right      - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   >
          % Total should add to 100%


21 CONFIDENCE - What confidence level does your organization typically accept
   for cost estimates?
     x   (Please mark just one)                                      Key Issue
       % 40%
       % 50%
       % 60%
       % 70%
       % 80%
       % 90%


22 HURDLES - What constraints do you face in performing cost risk analysis?
    x  (Please mark all that apply .)
       Limited functional support to identify and assess program risks
       Sparse historical data to support cost risk ranges                                         Key Issue
       Excessive judgment in analysis undercuts credibility
       Cost risk analysts lack necessary tools
       Cost risk analysts lack experience
       Presentations of cost risk to management lack power to convince
       Management and functionals are overwhelmed with complex analyses
       Management skeptical of groundrules, analysis, and conclusions
       Other … please write in to the right - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - >


                               Thank you for contributing to our knowledge of the U.S.
                                      Aerospace practice of cost risk analysis!
                                    Please email to hollis.m.black@boeing.com




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                 U.S. Aerospace Industry
                Cost Risk Analysis Survey

                     Hollis Black, The Boeing Company, Huntsville, Alabama
                           In cooperation with SCEA, ISPA, and SSCAG


                                             January-2008




                                                                                        2 March 2006 1




         “U.S. Aerospace Industry Cost Risk Analysis Survey”
                                   Hollis M. Black
                                   The Boeing Company

                  ISPA-SCEA Conference … May 2008 … Noordwijk
                     SSCAG Symposium ... May 2008 ... Noordwijk
                    SCEA-ISPA Conference ... June 2008 ... SoCal
                          SCEA "Estimator" ... Fall 2008

                             Abstract of Conference paper

The purpose of this paper is to summarize how the U.S. aerospace industry (Government and
contractor) develops and applies cost risk analysis to aid business decisions. This paper presents
the results of an aerospace risk survey, provided to ISPA, SCEA, and SSCAG members in early 2008.
The survey provides a distilled overview of cost risk assessment methods and applications in
current use by Government and contractor analysts.

The objectives of the survey and paper are to …
• Improve understanding of normative U.S. Aerospace practices
• Encourage cost analysts to be more proactive in assessing cost risk
• Prompt some agencies/companies to adopt better methods and tools

The survey depicts how cost risk analysis supports business decisions and helps …
The survey depicts how cost risk analysis supports business decisions and helps …
• Avoid cost overruns
• Revise new program strategy
• Resist unwarranted cost reductions
• Drop unwise R&D projects
• Reduce or increase profit reported to the public (SOX)

The survey was developed in conjunction with the Risk Sub-Group of SSCAG (Space Systems Cost
Analysis Group), and disseminated to members of ISPA, SCEA, and SSCAG associations.
Progress in cost risk analysis over the past 30 years. Extensive literature and symposiums have promoted
“best” cost risk analysis methods (qualitative and quantitative). Increasingly, Government customers and
Industry contractors have sought better methods to identify and manage technical, schedule, and cost risk.

The 2008 risk survey depicts the status, recent changes, and improvement across the U.S. Aerospace
industry since the previous, 1998 survey (published in SCEA’s Estimator, January-2000; and presented to
SSCAG and SCEA, 1999).

An interim survey was taken in 2006, and showed significant change in cost risk analysis since the original
1998 survey. The expanded 2008 survey clearly shows significant improvement in management acceptance
and use of cost risk analysis.

Risk identification, analysis, and control are essential to program health. The object of risk analysis is to
avoid cost surprises by proactively eliminating problems early in a program’s life.

This survey assesses cost risk analysis as one segment of Risk Management which …
• Efficiently identifies risks
• Assesses risk levels
• Effectively reduces or eliminates risks to achieve program goals
• Spans all phases of the program

In summary: This cost risk survey offers an important “watershed” overview of U.S. Aerospace Industry
practices. And it demonstrates progress toward important Government goals: Cost realism and reduced
risk.

                                  Author Bio
The author has been with the Boeing Company for 26 years, and assumed his present position as the head
of Parametric Estimating for Missile Defense Systems, Huntsville, in 1990.

In recent years he has developed history-based estimating tools, parametric estimates, cost risk
assessments, cost reductions for new design-fabrication processes, and new venture studies. He has
recently led large estimating teams in the development of competitive proposals relying extensively on use of
historical cost data.

Recent projects include Orbital Space Plane, Alternate Access to Station Transfer Vehicles, high energy
upper stages to HEO, new launch vehicles, missile weapon systems, ground missile launchers, and
Enhanced Expendable Launch Vehicles. Earlier cost estimating projects included First Lunar Outpost,
unmanned robotic missions, and Mars missions.

He was recently recognized with the prestigious “Boeing Defense Systems Estimating Best Practice
Champion Award” which recognizes his career efforts in advancing the estimating profession and leading
implementation of best practice initiatives.

Hollis provides subject-matter-expert advice to colleagues across the Boeing Company, with emphasis on
cost risk assessment, history-based estimates, software estimating, and new business analysis tools. He
has recently presented papers on these subjects to SSCAG, SCEA, AIAA, and NCMA.
has recently presented papers on these subjects to SSCAG, SCEA, AIAA, and NCMA.
Prior to Boeing, he worked fourteen years for Monsanto Chemical Company, with assignments as Assistant
Plant Controller, Corporate Offices senior financial analyst, and Operations Research.

He earned an MBA from the University of Texas in 1967 with an emphasis in Management Science. He
holds CMA (NAA/IMA) and CCEA (SCEA) certifications, served as President of the Huntsville chapter of
SCEA (Society of Cost Estimating and Analysis), and continues to be an active member of SSCAG (Space
Systems Cost Analysis Group).
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