• Predictive Analytics for Improved Cost Management  



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Original Post Date: Friday, October 4, 2013 Parametric modeling is excellent for all aspects of early-concept cost estimation, including go/no-go decisions downstream. So, in the spirit of bringing a transparency to (ethical) financial engineering… why not apply our craft to pricing “real-options”? The latter are essentially strategic opportunities for engaging resources (cost/schedule) into projects, ventures, investments, or even abandonments. The opportunity choice has value itself! Unlike static project Net Present Value (often, but not exclusively, approximated with Discounted Cash Flow) assuming pre-defined decisions, real-options reflect the merit of flexibility. If an R&D or proof-of-concept presents viability/marketability learning, the option has positive ...
Original Post Date: Friday, October 4, 2013 Ahhhh, the 80s… a challenging (but often confusing) time in an evolving computing world. Working in 1985 as a software estimator as well as SQA engineer in a quality assurance department that “audited” real-time projects using new concepts like OOD & OOP… well, you get the picture. It was a great time to get immersed into great work. And the good news: that company’s process as well as its developers were bullish on a young estimation/ quality type asking plenty of questions… as long as they were of the Yes-No variety. And ask ...
Original Post Date: Friday, October 4, 2013 ...wear the worst shoes. The cobbler was a master at his craft; he was just too tired to practice it when he got home from the shop. Sound familiar? A disciplined approach to understanding (functional) requirements as well as analogous projects (with actuals) is our not-so-secret sauce. Why run the risk of creeping back up our career learning curve? There’s already enough scope creep to keep us busy. Plus, for you management types charged with prospecting, a consistent approach towards estimation is a great way to connect with people who've felt the pain of ...
Original Post Date: Friday, October 4, 201 My "Real Options Valuation" blog suggested the use of parametrics in real options valuation. I’d like to offer the generalized use of our type of modeling in valuing tangible assets. Typically, fundamental analysis evaluates the intrinsic value of securities. I won’t attempt to compete with Warren Buffet here. But it is certainly the case that a company, or portfolio of securities reflecting many companies, is based in part on the market value of its product assets and their potential for future earnings, as well as other objective and subjective considerations. In parametric estimation, ...
Original Post Date: Wednesday, September 25, 2013 The “Systems Folder” cost object which is found at the start of every TruePlanning Project is most often confused with the “Folder” icon. These two however should not be confused. The “Folder” icon does not have an input sheet at all. It is not a cost object and contains no cost estimating logic or relationships.  It is provided as a collection point so that cost objects can be grouped in ways for clarity like to separate out phases of the acquisition lifecycle or to divide costs between subcontractors, etc.  Whereas, the “System Folder” contains all ...
Original Post Date: Wednesday, September 25, 2013 We may all agree that risk analysis is a necessary, vital part of any valid/defensible cost estimate.  We may not agree as much on the best approach to take to quantify risk in an estimate.  All estimates contain risk.  In the words of a wise cost estimator I know, “That’s why they’re called estimates, and not exactimates!”  We must quantify and manage levels of risk.  Why?  One vital part of a successful program is the ability to build a budget based on reliable cost projections.  Reliability increases when we can analyze inherent risk, ...
Original Post Date: Wednesday, September 25, 2013 A lot of clients have been expressing interest in modeling ASICs, FPGAs, and various other electronic modules inside TruePlanning® (TP). In the release of TruePlanning® 2014 there will now be the capability to model all these products inside our framework. Not only will you be able to model these products but you will of course be able to model the integration cost of these electronic components with Hardware and Software components. In addition you would be able to add and estimate the program management of your total project through our integrated framework. TruePlanning Microcircuits ...
Original Post Date: Wednesday, September 25, 2013 In Government contracting all contracts are made up of a network of suppliers. The Prime contractor who won the overall bid usually has a supply chain of vendors from whom they receive their products and services. In addition they have Subcontractors who provide services under a contracted agreement of work. These vendors and subcontractors most likely have their own network of suppliers which allows for a cost-effective supply chain that extends across America and to other nations. Vendors sell identical or similar products to different customers as part of their regular operations. These ...
Original Post Date: Wednesday, September 25, 2013 “Integration Factors – What Makes TruePlanning™ Stand Out in the Crowd” In today’s world, system integration is becoming more and more important. The government has started asking for designs that have additional capabilities, which allow connectivity both with systems under construction and systems already in use and deployed. The reason systems integration is important is because it adds value to the system by adding abilities that are now possible because of new interactions between subsystems. In a recently posted article on “The True Costs of Integration” the writer defined the costs of a typical integration ...
Original Post Date: Wednesday, September 25, 2013 Introduction/Problem Statement A current client has expressed interest in the default values on the simple vs. the detailed input sheet. More specifically the question arose because this particular customer as well as others had a misconception about the simple vs. the detailed input sheet default values. Most users did not realize that if they were only inputting values on the simple input sheet that the detailed input sheet default values were still be used in the calculation for their cost estimate. So the question became how much are each of these default value inputs ...