• Predictive Analytics for Improved Cost Management  



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We have all likely heard of “should cost” estimates.  Boiled down: If everything goes as planned, how much should program cost?  Are there efficiencies or best practices we can employ to get the job done faster and cheaper?  We may use analogies, parametrics, bottom up estimates, or extrapolation of actual costs to make a determination.  How many of us have heard of “should price”?  “Should price” is the determination of reasonableness of price for commercial items.  When contracting personnel receive quotes for off-the-shelf items, they need tools at their disposal to determine if the item is fairly priced.  On ...
Original Post Date: Tuesday, July 20, 2010 Next month (8/4 @ 12pm EST) I am presenting a webinar to discuss using TruePlanning on Source Selections. What prompted me to develop this webinar were the many recent success stories I’ve had using TruePlanning during the Source Selection process. Going a bit further, I am going to show an actual case study where TruePlanning was used to conduct an Analysis of Alternatives (AoA) exercise – along with cost/effectiveness results. We will explore a bit about the technical side of the proposed designs, develop the modeling in TruePlanning and discuss the results. In addition, we will explore ...
Original Post Date: Wednesday, November 10, 2010 I was recently struck by Ash Carter’s (Under Secretary of Defense for Acquisition, Technology & Logistics) Memorandum for Acquisition Professionals, Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending (14 September 2010). Within this broad sweeping memo, Ash Carter outlines 23 principal actions in five major areas aimed at increasing efficiency in Defense acquisition.  The first major area covered is “Target Affordability and Control Cost Growth”. Within this major area, program managers must treat affordability as a requirement before milestone authority is granted to proceed (starting with Milestone A). This ...
Original Post Date: Friday, December 17, 2010 In last month’s blog I wrote about Ash Carter’s (Under Secretary of Defense for Acquisition, Technology & Logistics) Memorandum for Acquisition Professionals, Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending (14 September 2010). I concluded the TruePlanning unified framework and comprehensive cost models, is a tool very well suited to provide the types of analysis outlined in the memorandum. In terms of Should Cost and Independent Cost Estimates (ICE), TruePlanning estimation software provides the industry standard capability to conduct Should Cost and calibration (actual program history) for ICE. Most ...
Original Post Date: Wednesday, June 23, 2010 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 value, above ...
Original Post Date: Thursday, October 7, 2010 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 types asking plenty of questions… as long as they were of the Yes-No variety.  And ...
Original Post Date: Thursday, August 12, 2010 The late Norm Crosby’s “Quality is Free” taught us that an investment into quality is more than offset by prevention of defects based upon understanding of requirements. Only with the latter can lack of conformance (and subsequent costs) be captured and hence quality quantified. So how then is Parametrics relevant?  Parametric estimating is more than cost modeling. Our craft represents an initial consulting function into the accuracy and completeness of program planning concepts. Our customers trust us to know when to ask and when to supplement. Yes, we are mathematical and financial modelers too. But I’d suggest that “Parametrics is ...
Original Post Date: Tuesday, August 24, 2010 Over the past several weeks several users have inquired about the best way to estimate costs associated with porting existing software to a new hardware environment. Normally for this situation some of the existing software will require some amount of adaptation to operate on a new server. However, a large portion of the existing software will only require integration into the new environment.   Estimating software costs associated with the above will require the use of several cost objects: - Systems cost object if program management, Quality Assurance, configuration, and    documentation costs are to be included in ...
Original Post Date: Monday, September 20, 2010 I have been fortunate in my career to have been associated with some great mentors. Each individual has provided me a bit of a golden nugget to carry with me as I tried to navigate my way through the professional waters. My first “civilian” manager, after I left the service and joined industry, provided me a list of the Laws of Analysis (I had just started a position as an operations research analyst). He explained that this list was a mix of serious and tongue in cheek snippets of wisdom. I looked at ...
Original Post Date: Monday, November 8, 2010  Margaret Wolfe Hungerford in 1878 in her book Molly Bawn coined the phrase …”Beauty is in the eye of the beholder”. This concept of the “value of beauty” has been expressed by others such as:    Benjamin Frankin in Poor Richards Almanack 1741 when he wrote;                 “Beauty, like supreme dominion                 Is but supported by opinion” David Hume in Moral and Political 1742 “Beauty in things exists merely in the mind which contemplates them.”   So what does this have to do with Cost Benefit? Well Merriam-Webster dictionary defines benefit as something that provides useful aid. Inherent in the term “useful” is ...