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Original Post Date: Thursday, May 19, 2011 I was recently asked by a client to provide a synopsis of what TruePlanning offers in response to the Ashton Carter Memorandum – Implementation of Will-Cost and Should-Cost Management. In the memo, the Undersecretary of Defense AT&L listed “Selected Ingredients of Should Cost Management”. It was interesting to note how much capability is provided by TruePlanning to effectively support efficient should cost management. In this month’s blog, I will share with my response to our client with you. ...
Original Post Date: Tuesday, March 29, 2011 “I think we have an obligation to work with industry to ensure that our suppliers do not just remain world class in defence, but aspire to be world-class manufactures that can withstand comparison to other industries.” Chief of Defence Procurement, Sir Robert Walmsley Is this a practical proposition or is it a pipe dream?  The following excerpt from Dale Shermon’s Systems Cost Engineering attempts to make the case that this type of comparison is possible. Many of the statements in proposals and marketing literature stating the superiority of a company are anecdotal or at best qualitative ...
Original Post Date: Wednesday, March 16, 2011 In Parametrics is Free, I acknowledged receiving (too late) “you should’ve known to ask that” over the years. Quality control after-the-fact is fine; but it’s better and cheaper to take a systematic approach to quality assurance as part of your estimating process. The sheer volume of what we model can often keep us so close to the details that we are unable to step back and put on our QA hat on for a sanity check. Enter Quality! On a very large project, our team has introduced a few regular cross-checks, notwithstanding typical math check-sums.   A round table peer ...
Original Post Date: Thursday, March 10, 2011 My previous blog discussed a “Should Cost” methodology used by PRICE Systems to complete an analysis. In the article I included a chart depicting calibration results for manufacturing complexities for each weapon system (X-Axis). Manufacturing complexities are a major cost driver within the model. This parameter can be derived from model knowledge tables, generators or from calibration. Many times the calibrated results are simply averaged and used for predicting cost for the new system. This assumes that the new system is very similar in technology and performance as the systems used for calibration. In general this is not the ...
Original Post Date: Monday, February 28, 2011 PRICE Systems recently accepted an assignment to complete a "Should Cost" estimate for a U.S. ally on a weapon system. The estimate included not only analysis on production costs, but also should cost on various operations and support costs. The only information provided by the client was quantity and time frame for production. A major ground rule for the estimate was that all data specific to the weapon system must come from publicly available information.  For example, mass, manufacturing process, and learning curve information must come from the public domain.  After reviewing the scope for the estimate, we decided to also ...
Original Post Date: Tuesday, February 22, 2011 In the February 2011 issue of National Defense, I was struck by the article “Uncertain Path Ahead for Military Truck Fleet”[1]. This article centered on the best strategies for modernization of the aging fleet of Humvees. The recapitalization of 150,000 Army and 25,000 Marine Corps Humvees is creating a “fix or buy new” dilemna for decision makers. According to the article, GAO analyst Michael J. Sullivan should include a “cost-benefit analysis that would minimize the collective acquisition and support costs of the various truck programs, and reduce the risk of overlap or ...
Original Post Date: Thursday, February 17, 2011 My June blog entry suggested the use of parametrics in real-options valuation. This month, 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, we take a top-down ...
Original Post Date: Friday, February 11, 2011 The DoD Cost Analysis Symposium (DODCAS 2011) is next week, Feb 15-18.  I’ll be there along with several of my colleagues at PRICE Systems.  This conference consistently provides an excellent source of information and shared experiences for the acquisition community and I am anxious to attend again this year.  Last year the conference occurred shortly after Congress passed the Weapons System Acquisition Reform Act of 2009 (WSARA) - and the majority of the sessions were focused on discussions about how the services, contractors and the government leadership planned on dealing with this new law.  From ...
Original Post Date: Tuesday, January 11, 2011 Last week I gave a webinar which detailed the PRICE perspective on Should Cost & Will Cost Management. The responses I have received have been very positive and also informing. For those of you who could not attend you can view the recorded version of that webinar here. Below is a brief summation of that presentation and some key takeaways. The Under Secretary of Defense issued a memo late last year. The thrust of the memo was the current need for greater efficiency and productivity in defense spending. His guidance contained 23 principal actions for improving the ...
Original Post Date: Thursday, January 6, 2011 Today, PRICE Systems, Senior Research Analyst, Bob Koury, will be presenting on Will Cost/Should Cost management. The presentation will focus on two main requirements mandated in the Ash Carter memo (mentioned here several times): Developing Should Cost/Will Cost targets and establishing Affordability as a requirement.  An example will be provided of how parametric estimating models were used to establish “Should Cost” targets and how they can be used by a budget authority (government or Industry) to be an informed consumer of contractor or sub-contractor bids. The demonstration portion of this webinar will focus on ...