• Predictive Analytics for Improved Cost Management



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Original Post Date: June 18, 2015 There is a movement afoot suggesting that there may be compelling reasons for employees to use their own technology (phones, laptops, tablets) in the workplace.  And it may actually be a movement inspired by employees not employers.  A recent survey (http://www.zdnet.com/article/research-74-percent-using-or-adopting-byod/) found that 74% of employers are allowing (or plan to allow in the near future) employees to use their Personal Mobile Devices (PMDs) for business purposes.  The benefits to the employee of Bring Your Own Device (BYOD) include the convenience of not having to lug around personal and business devices, the ability to ...
The Federal Information Technology Acquisition Reform Act (FITARA) which Congress passed in December of 2014 is touted as the “biggest legislative overhaul in nearly 20 years to the way the federal government procures, budgets and maintains IT”  (read more in this report).  And even in this day and age of extreme political gaming, one issue on which there is consensus in Washington and across the country is the fact that the federal government (and the American people) would certainly benefit by getting their IT house in order.  The act strives to put the authority and responsibility for IT decisions ...
Original Post Date: Tuesday, June 15, 2010 The GAO just published a report saying that strong leadership is key to planning and executing stable weapons programs. And, evidence is presented to back the claim, including result from study of a subset of the 21% of the 2008 defense programs that were deemed stable - on track with original estimates of cost and schedule. What kind of strong leadership made these programs stable? Things like experience, continuity, and open and honest communication, knowledge-based planning, disciplined execution of plans, and establishment of realistic cost and schedule estimates that account for risk are all cited.  Here’s ...
Original Post Date: Friday, July 9, 2010  While sitting in the operatory chair yesterday, my dentist said something that made me stop. He was complaining about an increasing rate of incompetence and apathy he observes in those delivering services to him. And while I do agree with him in principal, he and I are of the age where some folks label us as grumpy old men. So, it may not be as bad as we think. Regardless, the statement he said he made to the an unfortunate poor-quality service provider was, “If you don’t have the time to do it ...
Original Post Date: Monday, October 18, 2010 Some of us remember taking the Iowa tests during our early school days. The Iowa Tests of Basic Skills (ITBS) are standardized tests provided as a service to schools by the College of Education of The University of Iowa. The tests, administered to students in grades K-8, became a national standard for measuring scholastic aptitude – I was educated in Pennsylvania. Now out of Iowa comes another test of sorts, something called an Integrity Index Score based upon a proprietary algorithm of an organization called Iowa Live. Iowa Live calls itself, “a ...
Original Post Date: Wednesday, May 12, 2010 From my perspective as a cost researcher, the calibration tool is one of the most powerful analysis capabilities built into the TruePlanning cost management software . One way I can use this tool is to go back to an old estimate for a project that is now completed, and analyze the correctness of the previously entered input values. With this analysis, I can find ways to improve our methods of soliciting input values from the user to ensure the best values are entered the next time. This way, the TruePlanning models keep getting “smarter” as new information ...
Original Post Date: Friday, June 4, 2010 One of the great features of the TruePlanning cost management software is the fact that it makes it easy to handle complications of inflation and estimating projects performed in different countries and currencies. The costs associated with doing work in different countries, and the relative value of different currencies is constantly changing. To address this, the cost research team at PRICE does an annual economic update performed by the cost research team, and this blog will introduce some of basic concepts and research that goes into maintaining this feature every year. The price of goods and ...
Original Post Date: Thursday, June 24, 2010 "And me boss. And me boss. And me boss!" Just like Bugs Bunny tricking the mob boss into an unfair share of the loot, who doesn’t want a piece of the action. In this case the “action” is the estimate you have just finished in TruePlanning and would like to share with your coworkers. No problem, just share your project. Project sharing is a feature that is available to users who are using the Client/Server version of TruePlanning and it allows users to access projects that have been created on the centralized database by other users. If ...
Original Post Date: Monday, April 26, 2010  With so many acquisition programs over budget and behind schedule, the term “Cost Realism” is suddenly very popular. In my experience as an estimator on many major acquisition programs, two things have remained certain over years (besides death and taxes). First, the probability of the program ever achieving the original cost estimate is exactly zero and second, the more information that is known about a program, the more it will exceed its original cost estimate.    With that said, the move to Cost Realism is so important because it recognizes these two fundamental ...
Original Post Date: Friday, May 21, 2010 Last month I blogged about the importance of cost realism, its roots and how as estimators we must always reflect the truth, no matter how unpopular. This month I want to share with you a recent experience on a Source Selection. As part of the Source Selection team, my role was to conduct a Cost Realism estimate on each of the performers submitting bids. I want to share with you a few insights from that experience. One of the first rules I always follow is to never ask engineers to provide data that ...
Original Post Date: Wednesday, June 30, 2010  I recently had the opportunity to work directly for one of our clients on a high visibility, must-win proposal. The contractor was just about ready to commit to the bid number, but wanted to know the likely bids of the other two performers. We were asked to do a “Ghosting the Competition” study where we ethically collect open source data on two competing designs and combined with engineering technical data to develop a best cost estimate of the competitor’s bid positions.   Unfortunately, not much intelligence was known about the competing configurations, but the ...
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, September 1, 2010 I had expected to present my webinar,  “Best Practices for Cost Effectiveness Studies using TruePlanning” in early August. As you might know, I was planning to show a real world example from a recent engagement with a government customer. Unfortunately, since the Source Selection has not concluded with a downselect, I was not able to obtain the public release in time. However, for this month’s blog I will continue share some of the highlights of the webinar.   In last month’s blog we explored the uses of TruePlanning during Source Selection from the Supplier’s (or ...
Original Post Date: Tuesday, October 12, 2010 When I glanced at the Washington Post on Sunday, the following headline screamed out: Defense cuts could slow D.C. economy for years The article basically covers how Defense Secretary Robert M. Gates is calling for reducing spending on "support contractors" by 10 percent each of the next three years as the Defense budget shrinks. As Washington DC is a hub for these types of companies, the impact is expected to be significant. According to the article, more than a quarter of national defense spending contains of outlays for service contracts. Among the largest companies ...
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: Monday, December 6, 2010  In his August blog-entry here, Zach Jasnoff outlined typical client perspectives for the different types of analyses that TruePlanning can accommodate. Working on a large project, we’ve experienced situations that, realistically, can happen where the initial intent and model structuring later have the boundaries of model appropriateness stretched. An Analysis of Alternatives (AoA), for example, is meant to measure deltas between baseline and its alternatives. If common costs “wash” then they can be excluded… which becomes an issue when treated as a Rough Order Magnitude for customer budgeting.  Likewise, if a ROM or Independent Cost Estimate ...
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: Tuesday, April 20, 2010 In September of 2009 the United States Government Accountability Office (GAO) submitted a report[1] discussing the lack of robust Analysis of Alternatives for weapons systems. The report indicated that … “Cost, schedule, and performance problems in the Department of Defense’s (DOD) weapon system programs are serious. Why is it that DoD weapons programs experience a simultaneous cost growth and performance degradation? I believe the answer is found in unrealistic cost estimates and schedule estimates mostly driven by pressure to win a program within a certain budget constraint. Excessive requirements change either through poor ...
Original Post Date: Monday, June 7, 2010 Currently we are exploring the best approach to including a more comprehensive cost estimate for Total Ownership Costs (TOC) into TruePlanning. The current version of the software has focused on development and production costs with some life cycle costing including. The life cycle costs included are focused on the system specific O&S costs such as initial spares for priming the supply pipeline, maintenance, replenishment spares, etc. It is a system view as opposed to a program view of TOC. As we better understand the need to conduct affordability studies it has become clear that design decisions ...
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: Wednesday, September 29, 2010 In May of this year the Washington Post published an editorial article on the need to reduce waste in the Defense Department. The byline of the article was “Defense Secretary Gates’s war of necessity against wasteful spending.” In this article the writer points out that the secretary is taking on the challenge of maintaining our military force [at reasonable level of effectiveness] during a time in which the President and Congress are seeking cost savings / reductions based on the decrease in our presence in Iraq.  Mr. Gates goal is to look for efficiencies ...
Original Post Date: Wednesday, August 25, 2010 To me the greatest strength of TruePlannning®  is its flexibility and wide range of parameters. AND, to me the greatest weakness of TruePlanning®  is its’ flexibility and wide range of parameters. The nature of the TruePlanning® framework, the idea of cost catalogs with cost objects, and the implementation of activity based costing allows or provides for a wide range of solutions to our cost estimating requirements. TruePlanning’s ® ability to address a wide range of cost problems lies in its flexibility and extensibility. The clever use of worksheets, multipliers, and the product breakdown ...
Original Post Date: Monday, August 18, 2014 I had the distinct pleasure last week of attending the 2014 NASA Cost Symposium.  While to the uninitiated this might sound like a bit of a snoozer – it was actually quite interesting and proved to be the source of a ton of valuable information.  The event took place at Langley Research Center in Hampton, VA – near Williamsburg, Newport News, and not too far from Virginia Beach.  My participation was somewhat self-serving in that I was there to talk about PRICE’s new Space Missions Cost Models for TruePlanning®.  This model – discussed ...
Original Post Date: Friday, July 25, 2014 July 2014 marked the 25th anniversary of Neil Armstrong’s historic stroll on the moon.  If you go to the NASA website and select Missions you’ll probably be amazed at the number of missions in NASA's past, present, and future.  Unless you’re living under a rock, you know about the International Space Station, and the Hubble telescope but I’m guessing there’s a lot about space missions that many of us are unaware of.  The Dawn spacecraft, which was launched in 2007 from Cape Canaveral, was sent into Space to help NASA scientists learn about the history ...
Original Post Date: Thursday, July 17, 2014 Introduction Parametric cost estimates provide high quality, defendable estimates early in a project’s life cycle. This makes them ideal when producing bid and proposals. The nature of parametric cost estimates, however, requires the results of the estimate to be framed in terms of specific CERs and Activities and Resources. It is common for an organization to have a more granular set of Resources than the ones used to support the CERs. One approach to resolving this issue would be to use the TrueMapper application from PRICE Systems to map TruePlanning Resources to a more ...
Original Post Date: Thursday, July 10, 2014 Introduction TruePlanning provides a powerful and highly customizable reporting environment. Project data can be viewed from many different perspectives and those perspectives can be saved and reused across all projects. Results can be exported to Excel and Word as custom reports. There are, however, some instances where there is a need to get beyond the two axes used in TruePlanning’s reporting engine. This need is sometimes expressed by users preparing TruePlanning cost estimating project data for use in a bid or proposal. Perhaps the data needs to be split by phase and labor/non-labor over ...
Original Post Date: Tuesday, July 1, 2014 Whether you’re doing a software cost estimate to support a Bid and Proposal effort, a software valuation, should cost analysis, or to develop a detailed project plan, it is vitally important to understand the ‘size’ of the software you are estimating.  The problem with software size is that it tends to fall into the intangible realm of reality.  If you tell me you are building a widget that weighs 13 pounds, I can really start to get my head around the task at hand.  If I’m chatting about this with my European colleagues, ...
Original Post Date: Wednesday, April 2, 2014 Introduction Parametric estimates provide reliable, reproducible, and flexible views into cost and effort so it’s only natural to want to include this data in a bid and proposal workflow. With TruePlanning 2014 big steps have been taken to make such integration seamless and easily reproducible.  New tools in the TruePlanning suite of products, as well as, integrations with some of the major bid and proposal software applications are at the heart of this new feature set. You can learn more about TruePlanning 2014 and the PRICE cost estimation models at our website, but let's ...
Original Post Date: Thursday, March 20, 2014 One of the complications in generating Bids and Proposals for Modules and Microcircuits is determining the “Should Cost” for better cost realism. Most of the electronic modules and their components in the proposals are not actually manufactured by the Proposer, but rather by a subcontractor, thus becoming a Purchased item. It is difficult to determine the cost of making the Module, and determining a fair cost. Costs for the modules include Assembly and Test costs together with the component costs. Components such as ASIC’s (Application Specific Integrated Circuits), have both the cost of developing the devices and ...
Original Post Date: Monday, December 30, 2013 Unless you live under a rock, you are aware of the healthcare.gov rollout disaster.  While similar IT failures are regularly in the news, the high profile of healthcare.gov has really mainstreamed awareness of the fragility of many IT projects.  Check out this article entitled ‘The Worst IT project disasters of 2013’.  It details IT project failures such as:  IBM’s failure to deliver on a payroll system project that could potentially cost taxpayers up to $1.1 Billion dollars US.    SAP’s failure to deliver satisfactorily on requirements for ...
Original Post Date: Tuesday, December 3, 2013 Forrester defines big data as “the techniques and technologies that make capturing value from data at extreme scales economical”.   Wikipedia defines it as “a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications.  The challenges include capture, curation, storage, search, sharing, analysis and visualization”.  Many use the 3Vs to describe the characteristics of big data – Volume, Variety and Velocity.   Basically Big Data refers to number crunching of epic proportion, accomplishing in minutes what may have ...
Original Post Date: Wednesday, October 30, 2013 Agile development practices have enabled software development organizations to deliver quality software that optimizes the customer’s satisfaction with the value they receive for their money.  That being said, agile development may not be the best approach for every software development project.  Alistair Cockburn, agile development specialist and one of the initiators of the agile software development movement, acknowledges that “agile is not for every project”.  Further elucidating this point, Cockburn opines:  “small projects, web projects, exploratory projects, agile is fabulous; it beats the pants off of everything else, but for NASA, no”. .  ...
Original Post Date: Friday, October 4, 2013 In my "Work Breakdown Structures are Workable!" blog, we reviewed the subtleties of using the [object] tag to your advantage in creating different sorts and roll up subtotals. As a followup, I’d like to drill down a bit on the initial step of using the “copy grid” exports. Each row number is unique, thus creating an identifying key for the vlookup function in Excel. Since all object X activity instances are allocated 100% to one of the three phases (with very rare exception), these row keys allow you to sort and re-group ...
Original Post Date: Friday, October 4, 2013 True Planning results have many options, including viewing Costs by Activity. While simple, this view can be quite powerful, especially when exported for re-organization manipulation. In a recent exercise, the WBS mapping of common objects, estimated by separate multiple scenarios, presented a non-trivial chore in Excel. “Transposition” features work fine for matrices, as do pivot tables. But how does one map object by activity grids into activity lists, similar to MIL-STD 881a, with singular “roll up” instances of all nonzero object costs? The secret is in how True Planning appends each activity output with the ...
Original Post Date: Friday, October 4, 2013 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 quantified towards quality. 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 ...
Original Post Date: Friday, October 4, 2013 In his August 2010 blog-entry, Zac Jasnoff outlined typical client perspectives for the different types of analyses that True Planning can accommodate.  Working on a large project, we’ve experienced situations that, realistically, can happen where the initial intent... and model structuring… later has the boundaries of model appropriateness stretched.  An AoA, for example, is meant to measure deltas between baseline and its alternatives.  If common costs “wash” then they can be excluded… which becomes an issue when treated as a Rough Order Magnitude for customer budgeting. Likewise, if a ROM or ICE of ...
Original Post Date: Friday, October 4, 2013 I’m not a golfer. But we’ve all heard one say “that’s why I play” after hitting a shot and feeling like it all came together. What “it” is, in terms of mechanics and timing, I’m not really sure. In our own world of parametrics, it’s the feeling of adding value in that golden moment of facilitating decisions and forward momentum. We wear many hats: estimating, consulting, systems engineering...even cost accounting. Building an AoA, ICE or ROM is where rubber-meets-the-road in regards to configurations and assumptions. Not too long ago I was in a discussion with ...
Original Post Date: Friday, October 4, 2013 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 ...
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 ...