• Predictive Analytics for Improved Cost Management



Blog



Original Post Date: Thursday, May 13, 2010  Earlier this week I conducted a webinar intended to make PRICE users aware of the Cost Research Services available to them as part of the license fee they pay to use PRICE products. I thought I would recap the highlights of this webinar for those of you who might have missed it. At PRICE we understand that cost estimating tools, while useful and valuable, do not always present the complete solution. Every single cost estimation projects presents new and unique challenges.  We think it's important that in addition to solid, time trusted cost estimating models, ...
Original Post Date: Thursday, May 6, 2010 I am excited about the efforts described in Derek Kaufman’s article on the AFMC website.  For the complete story please see this link http://www.afmc.af.mil/News/Article-Display/Article/154211/dod-making-massive-investment-in-its-acquisition-workforce/. The DoD is investing in the rapid build up of a new foundation of acquisition workers focused on estimating costs and negotiating prices through continuous learning.    Mr. Assad notes that Wright-Patterson Air Force Base, Ohio, was once the preeminent DoD recognized leader at estimating costs and negotiating prices with defense contractors. It's a skill that has been allowed to atrophy, he noted.   "We need to build that pricing capability back ...
Original Post Date: Friday, April 30, 2010 I have been frequently asked to do crosschecks on other people’s software cost estimates which are potentially done in a variety of tools from spreadsheets to SLIM. One of the common operator errors I see from other users is not understanding what activities and resources are included in the outputs of the particular tool that they are estimating with. This is akin to deciding between two cars and not knowing if both come with the same sets of features (stereo, AC, heated seats).   With software estimation tools you need to know what work is getting estimated ...
Original Post Date: Friday, April 23, 2010 Software project failures coupled with rapidly changing business needs are forcing organizations to revisit the way they go about building software.  Agile development has emerged as one possible solution to the woes of the software industry.  Agile enthusiasts claim significant increases in productivity and quality, while detractors cite instances where the reverse is true.  It seems to me that probably both are right  - some of the time anyway.  Agile means many different things to different organization.  There is a long list of agile tenets but not every method of agile applies all ...
Original Post Date: lThursday, April 8, 2010 Despite the plethora of literature on Technology Readiness Levels (TRLs) it remains a difficult concept.  I thought I would share my interpretation. For most of us the concept of technology readiness is hard to grasp. This is because in general, our experiences with technology are with fully matured technology. In 1961, President Kennedy challenged US scientists, mathematicians and engineers when he announced that within the decade of the 1960s the US would ‘land a man on the Moon, and return him safely to Earth’. At the time, there were no solutions to solve ...
Original Post Date: Friday, April 2, 2010  The newest version of TruePlanning has been released and distributed to customers. The new features were designed to make it easier to estimate entire systems, not just individual components or sub-systems. TruePlanning is an excellent solution in this regards. Systems that require you to estimate software costs, hardware costs, and the integration of multiple pieces of each can all be done in one framework. There are  specific features in this release, like input inheritance, that allow you to make changes at the top Project level which then flow throughout the entire system.  This saves an ...
Original Post Date: Thursday, April 1, 2010 Recently Dale Shermon of PRICE Systems gave a webinar presentation “Delivering Programs with TOC and CAIV” which looks at the application of parametric cost estimation in the context of determining a delivery strategy.  He then walks through the Cost as an Independent Variable (CAIV) process that is often employed within a Total Ownership Cost (TOC) approach to estimating. Often, once a large defense contract is won by the business development team the program delivery team then has the job of figuring out “Ok, what exactly have we just won and how do we deliver it?” Dale’s presentation does an ...
Orignal Post Date: Thursday, April 1, 2010 Here are some choices to the question: 1. By comparing with old analogous data? 2. Creating and presenting the basis of estimate (BOE) documentation? 3. Illustrating a track back to cost estimating relationships (CERs) and their referenced historical databases? 4. Demonstrate that the estimate came from a reputable parametric tool like TruePlanning? 5.  Any other approach? 6.  All of the above or some combination of these approaches? 7.  You don't have this problem i.e. you never had a need to prove the credibility of your estimates? If the answer is point number 7, ...
Orignal Post Date: Thursday, February 11, 2010 That’s a question that members of the cost estimating community will try to answer at next week’s  43rd Annual DoDCAS symposium. The conference is centered around the “theory and implementation” of the WSARA 2009 (Weapons System Acquisition Reform Act). Simply put, the cost estimating community needs to first and foremost understand what the real life implications of the WSARA will be. At least in theory that is.   According to GAO, nearly 70% of the Pentagon’s 96 biggest weapons programs were over budget in 2008 and another government report found $295 billion in waste ...
Orignal Post Date: Thursday, January 21, 2010  It’s a common practice to measure failure or success of a project based on the initial functionality requirements and initial cost and schedule estimated. The Standish Group publishes its Chaos report for software projects which terms a project as a "Success" if it is completed on time, on budget, and satisfying all the initial requirements. Projects are deemed a "Challenged" if functionality is achieved but cost and schedule over runs occur and "Failed" if a project is cancelled while in execution. However there are other factors e.g. Tom DeMarco’s  Estimation Quality Factor  and Boehm’s Cone of Uncertainty (COU) ...
Original Post Date: Friday, January 15, 2010 Failed software projects are always bad but there are additional complications when there is a contract in place to deliver the software.  Disputes over failed software can result in costly litigation that generally damages both the vendor and the buyer. According to observations of Capers Jones in "Conflict and Litigation Between Software Clients and Developers" (2007) , 5% of the projects his clients were involved in either had litigation pending or were currently involved in litigation over project failures.  His findings indicate that it is very large projects, over 10,000 Function Points that ...
Original Post Date: Friday, December 18, 2009 The cost estimating community mourns the loss of a true pioneer this week. Our thoughts and prayers are with his family. Frank Freiman has a special place in the history of PRICE Systems as his innovative work is directly responsible for the company’s existence today. This is a classic case of where one man can truly made a difference. Thousands of estimators across the world have benefited and continue to benefit from his accomplishments. Frank began studying the applications of statistical quality control as an officer in the US Army during World War ...
Original Post Date: Friday, November 20, 2009 Bill Scheessele’s article in the Washington Technology, Time for a hard look at marketing strategies, is a quick read about organization’s reacting to these new economic conditions. He suggests that most organizations are... "Attempting to move forward with an obsolete business development operation, reacting to fewer opportunities and shifting budgets by shedding business development personnel, sticking with an outdated business development process that everyone in the industry uses, or doing nothing while waiting on the sidelines for conditions to change are not reasonable decisions." This is further supported by the recent flurry of acquisitions both ...
Original Post Date: Friday, November 13, 2009 Recently, Dale Shermon presented a webinar, "Preparing Bids Faster with Fewer Resources".  The content for the webinar was taken, as the title of this post suggests, from the recently released book Systems Cost Engineering. The webinar discussed how parametric estimating could dramatically decrease the time and thus the cost that is required to make important business decisions about whether or not to pursue contract opportunities. There are critical activities that organizations engage in every time there is an RFP such as Bid/No Bid decisions or competitive assessments.  So whether the RFP calls for estimating software costs or ...
Original Post Date: Wednesday, September 30, 2009 Recently I was interviewed by Doug Beizer of Federal  Computer Weekly for an article about the shift of government agencies away from custom software development and towards the use of cloud computing.  The interest in this topic seemed to stem from the introduction of Apps.gov online store earlier this month.   Having been in the software cost estimation community for more than 25 years, I have experienced this transition first hand but never really stopped to think about the whys and wherefores until questioned by Doug.  It was an interesting stroll down memory lane.  As an example, ...
Original Post Date: Wednesday, September 16, 2009 While most of the books on the topic of parametric modeling take a look at detailed techniques and fundamentals, such as building parent/child relationships or the mathematics behind models, Systems Cost Engineering, takes a more practical perspective to answer a very basic question:  What can parametric estimating do for my organization and how can we implement it?  The book covers an array of business processes that can be dramatically improved with the application of a standardized parametric cost estimating framework. These processes exist across multiple phases of a program's lifecycle such as early concept planning through development and production. Chapters are ...
Original Post Date: Thursday, August 13, 2009 Let’s start with a simple test. Which is greater: the number of six-letter English words that have "n" as the fifth letter or the number of six-letter words ending in "ing"? If you are like most people you’re thinking the correct answer is six-letter words ending in "ing". But most people are wrong. And the reason is simple, people rely on what they can easily recall. Since it’s much easier to think of 6-letter words ending in "ing" the fact that people come to that conclusion isn't surprising. Psychologists refer to this as availability bias. ...
Original Post Date: Monday, July 20, 2009  Did you know that according to kgb a single Google search takes 0.2g of Carbon Dioxide? Asking Google 2 questions is equivalent to boiling a tea kettle full of water.  If there were 2 billion Google searches a day in 2008, today we're looking at more than 400 Million g of Carbon Dioxide a day just for Google searches.  A part of my job at PRICE is to look into emerging trends and technologies to determine if and how changes in the world impact the costs of hardware, software and information technology projects.  ...
Original Post Date: Thursday, July 16, 2009 In an article in last weeks Harvard Business , IT Costs: Do You Speak Their Language), John Sviokla discusses the fact that as the information business continues to grow it is increasingly important for organizations to understand the impact of IT as it relates to their operating costs. This certainly rings True to us here at PRICE Systems who have recognized this reality. TruePlanning 2009 has been developed by PRICE specifically to help organizations get their heads around the true costs of Information Technology. Application development projects can represent significant expense to an ...
Original Post Date: Tuesday, June 16, 2009  Bad project estimates lower profitability.  Despite this fact many business leaders don’t invest in improving their estimating capability, buying into the fatalistic myth that this is as good as it gets.  This is patently wrong.  Project portfolios are prioritized based on the total expected Return on Investment (ROI) of projects.  Investments in the wrong project based on bad estimates could lead to lost revenue or delay of net benefit. All around us we see reports of software projects which are over budget, delivered late or cancelled because they are taking too much time ...
Original Post Date: Thursday, April 30, 2009 It's finally Spring!  And along with the leaves on the trees, the beautiful flowers and the happy chirping birds.... it is once again Baseball Season.  Baseball season is a beautiful thing - and not just because, as a resident of South Jersey, my team is the 2008 World Champion Phillies.  I just love the game and everything about it.  I believe this is because with baseball the impossible becomes possible because anything can (and will) happen and with a good plan in place you can still be successful. I didn't always love baseball.  ...
Original Post Date: Thursday, April 2, 2009 I have to say that my foray into blogging has been an interesting one.  By definition, the Chief Scientist should be a nerdy sort of geek too high brow to pontificate on topics in such a pedestrian format.  Actually I kind of like it.  In part because I enjoy writing and I'm not picky about what I write - technical documents are OK but pontification works as well.  And in part because I know that in order to be a good writer in a particular genre one must read extensively from that ...
Original Post Date: Monday, March 23, 2009 Here’s a great article I happened upon while doing research for a paper I’m writing.  “Lessons Learned: IT’s Biggest Project Failures”  In this article we are treated to stories of IT projects that “first make people laugh and then” (hopefully) “make them think.”  As a long time student of the failed software project, I was neither surprise nor disappointed with the projects relayed.  The projects noted failed for reasons such as: Failure to perform a should-cost analysis before selecting a supplier Failure to recognize an unhealthy project before it ...
Original Post Date: Tuesday, March 17, 2009 Doing business with the Department of Defense (DOD) requires that you have disciplined company governance in specific areas as noted in the Defense Federal Acquisition Regulations (DFARs). In particular, DFARs 215.811 and 252.215-7003. DFARs 215.811 requires all DOD contractors, large and small, have adequate estimating systems to support their proposals. As part of a regulatory oversight requirement, the Defense Contracts Audit Agency (DCAA) will periodically perform contractor estimating system reviews. If you are a large defense contractor, you can expect your estimating system to be reviewed routinely. Smaller defense contractors can be audited ...
Original Post Date: Monday, March 9, 2009 The US Department of Defense (DOD) continues to be plagued with cost overruns on major weapons systems.  Last month Senators Carl Levin (D-Mich) and John McCain (R-Ariz) introduced the 2009 Weapon Systems Acquisition Reform Act intended to put measures in place to force the DOD to address the issues that cause overruns and schedule slippage.   Among other things,  this legislation would create the position of Director of Independent cost assessment for Major Defense Acquisition Programs (MDAPs) and require the DOD to perform trade-offs between cost, schedule and performance early in the program lifecycle. ...
Original Post Date: Friday, March 6, 2009 Barak Obama's 2010 U.S. Federal Budget proposal promises a "New Era of Responsibility", and in the introduction he says,  "...we must begin the process of making the tough choices necessary to restore fiscal discipline, cut the deficit in half by the end of my first term in office, and put our Nation on sound fiscal footing." Tough choices indeed. Therein lies the greatest challenge.  With the best intentions, our government tries to do good things, but always starts more projects than it can afford.  And often the expected "value" of an initiative is never fully vetted before a project is ...
Original Post Date: Wednesday, February 25, 2009 Author Nassim Taleb describes a Black Swan as an unexpected event that ultimately leads to what best can be described as a paradigm-shift. In his book, The Black Swan, he includes 9/11, the rise of the Internet, Google and the personal computer as Black Swan events. We could not have predicted those events but they have had a huge impact on us. Even positive Black Swans can be a source of frustration. Since so few people are prepared for them, it becomes impossible to profit from them. The group that is most frustrated by ...
Original Post Date: Friday, February 6, 2009 Last week I was asked to participate in Career Day at my son’s elementary school.  I was both honored and humbled.  Honored because the school felt that my career was something the children would be interested in and humbled because I was forced to concoct a story that would make cost estimating and analysis both understandable and interesting to children from kindergarten through grade eight.  Fortunately the format was such that I presented to each grade individually so at least I did not have to come up with one story to address ...
Original Post Date: Monday, February 2, 2009 In a seminal RAND Corporation report, Bureaucracy Does Its Thing, author and former CIA agent K.W. Komer promotes the idea that the mindset of America’s institutions led to problems in Vietnam. His thesis is that the bureaucracies of the U.S. were fixated on fighting the Vietnam War according to how the bureaucracies had prepared and organized instead of in manner that the situation required. As I read the stimulus package before Congress, I see a focus on the idea that new technology will create jobs. Yet I also have read that Governor Schwarzenegger ...
Original Post Date: Thursday, January 22, 2009  Like many others, I was astonished last Thursday by the images on my browser of those 155 extremely lucky people standing in the Hudson River.  And they certainly were very lucky last Thursday.  If you’re destined to fly on a flight bound for collision with birds, you want it to be piloted by a hero like Captain Sullenberger.  The incident made me think about what a hero is and how we all have the opportunities to be heroic in our chosen professions. According to Wikipedia, a hero refers to a character that, in ...
Original Post Date: Wednesday, January 21, 2009 Dude, Where’s my Stimulus? If you turn on the news or open the newspaper, you will definitely come across an item about the stimulus package. Obviously, there will be much debate to come over the price tag for the initiative. But I wanted to take a moment to discuss where resources will be directed and how they will be dispersed. I also would like to talk about how this bill might affect us in the "Land of Estimation." High-tech is the theme for this stimulus. Most projects will involve technology upgrades of one sort or ...
Original Post Date: Tuesday, January 20, 2009 Today, change is in the air.  As I write this, Barack Obama is about to be sworn in as our new U.S. President and the space community, among others, should be braced for change.  A recent LA times article reported that of the 74 questions asked of NASA by the Obama transition team, over half were on basic spending issues, including cost overruns. The Obama team and the NASA Administrator Michael Griffin clearly do not see eye-to-eye.  Monday, it was announced that Mr. Griffin will step down from the post.  Griffin characterizes himself as an ...
Original Post Date: Tuesday, December 30, 2008 It seems that, even in the midst of billions of dollars of bailout funds, the federal government is taking accountability a little more seriously.  Politics aside, the government is making the effort to ensure that every dollar spent is an investment rather than waste.  As we all know, industry follows the lead of government.  We see this effort for accountability in a recently introduced Senate resolution (that will be re-introduced in the next Senate), S. 3384. The Information Technology Investment Oversight Enhancement and Waste Prevention Act of 2008 was sponsored by Sen. ...
Original Post Date: Wednesday, December 17, 2008 A recent Gartner report indicates that industry enthusiasm for SOA is waning.  The reasons cited are the lack of enough people with the proper skill sets to perform SOA deployments and the lack of a good business case for SOA.  It’s an interesting but not really unexpected direction.  SOA has been surrounded by significant hype, ensuring that organizations surveyed would be anxious to profess their desire to start a SOA project.  But as the rubber hits the road, these organizations are realizing that SOA may not be the answer to all of their ...
Original Post Date: Wednesday, December 17, 2008 This was a fun and gratifying week at PRICE Systems. In our Mt. Laurel, NJ headquarters we had our annual holiday gift wrapping of presents we donated for needy children and families in the area.  The PRICE team gathered in our classroom and the wrapping began with no pre-instruction or guidance - but much merriment.  What a study in production process and learning!  Wrapping that first present was awkward.  It had been a while since I wrapped last.  How to measure the paper?  Where to cut?  How to keep the cut straight?  Which way do ...
Wednesday, December 10, 2008 by Anthony DeMarco Technology readiness is a critical cost driver of development programs.  Many high technology programs fail because initial cost and schedule expectations were based on the assumption that the technologies employed were proven,  when actually they were not. Space programs have the most dubious history in this regard.  I once listened to a Lockheed Martin executive explain how the X33 space shuttle was a great vehicle, but was canceled because it was, "two inventions short of meeting the requirements". Canceled after over one billion dollars were spent. Starting development projects that have constrained budgets and ...
Original Post Date: Thursday, October 30, 2008  Software cost estimation is hard.  I have learned this the hard way – as a software developer and later as the manager of software development projects. Today, as a builder of cost estimating software, I learn something everyday about software development that reinforces the fact that software cost estimation is hard. I attend a lot of trade shows and I talk to a lot of software people about how they estimate software costs.  Many of them have no formal process, many don’t collect data as projects progress, many of them perform estimates off the ...
Original Post Date: Tuesday, October 7, 2008  Jacob has a great comment to my recent post on getting it "right the first time".  He notes that requirements are often fuzzy and that estimates rely on peoples' opinion of cost and duration - and that the are often wrong.  He asked what silver bullet we have. Our silver bullet is a proven discipline that makes people better estimators and sheds light on fuzzy requirements. It starts with the people. Becoming an accurate estimator requires the same step-by-step approach as any learned skill such as golf or tennis or swimming (things I ...
Original Post Date: Monday, October 6, 2008  According to Gartner, Service Oriented Architectures (SOAs) will be used in more than eighty percent of mission critical operational applications and business processes by the year 2010.  Perusal of the literature on SOAs leads to visions of ease of implementation and cost savings of epic proportions.  And it is likely that not only will service oriented implementations results in cost savings, but that without them many currently envisioned capabilities in the corporate world and the Department of Defense (DoD) will be impossible to deploy, maintain, and evolve as technology explodes and requirements and ...
Original Post Date: Wednesday, October 1, 2008  As I prepare my remarks for the first PRICE Systems International Symposium and User Group Meeting in Asia hosted by the PRIGENT corporation, I am astounded by the recent globalization of the Defense Industry.  Worldwide weapon systems acquisition has been permanently changed by:  the merger of US defense contractors in the 1990's, the entry of European contractors into the US Defense Industry (EADS, BAE) in the 2000's, and the entry of Korea into the global market happening now. Today, BAE Systems ...
Original Post Date: Thursday, September 18, 2008 While many at Bear Stearns, Lehman Brothers, Merrill Lynch, and AIG are staggering from the Wall Street financial crisis, others on the acquisition side are contemplating the fate of redundant operations created by the these consolidations.  This reminds me of the rapid consolidation of the global Aerospace and Defense (A&D) during the 90's after the fall of the Berlin Wall.  Granted, this consolidation is happening at a much faster pace, but it would be wise for decision-makers to do a little performance measurement before they slash and burn redundant operations.  During the A&D consolidation, the General Electric Corporation called ...
Original Post Date: Wednesday, September 10, 2008 Martin Woodward ‘s comparison of software development to Sudoku does an excellent job of explaining why software cost estimation is hard.  We constantly hear about software development projects that are unsuccessful because they have violated one or more aspects of the Project Management Triangle  - they are either delivered late, delivered over budget or fail to deliver the capability that users require. And while I firmly believe that software development is an engineering discipline, software project estimation is often more complicated than estimation for other engineering disciplines because software project output is not nearly ...
Original Post Date: Wednesday, September 10, 2008 A good point is made in a comment to my last post, Chris Carter says, "As estimators I think it is our duty to tell our customer (management) what we assess the possible range of outcomes to be so that they can make use of this information ".  I agree that we should always deliver an indication of accuracy every estimate.  Uncertainty and risk analysis is an integral feature of TruePlanning and we educate our clients on the value of estimate ranges to optimizing project and portfolio performance. The uncertainty-based probabilistic confidence-level of an estimate that ...
Original Post Date: Wednesday, August 27, 2008 While working with clients who operate under fixed budgets I often hear, "Cost is not an issue when we plan and budget, so why is estimating important?".  I quickly stress that estimating is not just about cost.  It about balancing project scope, cost, time, benefits and risks. If your estimates are not accurate, your projects and portfolios are not optimized – and you are wasting money. Projects are planned and managed within scope, time, and cost constraints. These constraints are referred to as the Project Management Triangle.  Each side represents a constraint.  One side ...
Original Post Date: Friday, August 22, 2008 Software size measurement continues to be a contentious issue within the software industry.  While the software engineering community has made significant progress in it’s quest for the right way to assign value, the journey has not been without missteps and detours.  And there is still more work to be done. When I first started programming it never occurred to me to think about the size of the software I was developing.  This was true for several reasons.  First of all, back in the day, software had a tactile quality through the deck of punched ...
Original Post Date: Tuesday, August 19, 2008 Recently a client approached me with a thought provoking inquiry.  They were interested in performing historical trend analysis on their software projects to support estimating software costs for future technologies.  They have done this for years with hardware procurements and wanted to start performing the same kind of analysis for software. For hardware it’s not that hard to do, we have tangibles like RAM size, processor speed, resolution, etc. The question they had for me was “What are likely candidates on which to perform historical trend analysis for software”.  Think about it.  What ...
Original Post Date: Tuesday, August 12, 2008 I frequently attend trade shows and conferences focused on software development and/or cost estimating.  These shows provide a great opportunity for me to perform informal, unscientific surveys of the state of the software estimating discipline.  When queried on software estimating practices, more than half of those surveyed indicate a method that significantly resembles some attraction at a local carnival.  To the follow up question of “How’s that working for you?” the reply is almost always as expected – “Not too well”. As an industry we have failed pretty miserably at institutionalizing software estimating ...
Original Post Date: Wednesday, August 6, 2008 Last week the U.S. Senate Committee on Homeland Security and Governmental Affairs held a hearing entitled "Offline and Off-budget: The Dismal State of Information Technology Planning in the Federal Government".  The prepared remarks by those who testified before the committee make good reading.  You can find them here. The committee focused on the many IT projects that are overrunning cost and schedule, giving most Federal Agencies failing grades on their budget management report card.  My experience while working with Fortune 500 companies is that they do not do much better - we just do ...
Original Post Date: Friday, August 1, 2008 If you are a baby-boomer like me and occasionally suffer from symptoms of mid-life crises it is important to answer the question, " What is the purpose of my work, my mission, my raison d'être?" So, I am starting this blog by taking a step away from the challenges on my desk at the moment to look at the big picture. Business leaders agree that reliable shareholder value lies in companies that sustain profitable growth and are "built to last". Hence, leaders focus on improving key performance indicators (KPIs) throughout their companies to ...