Original Post date: October 14, 2015

A few weeks ago I encountered a question from some users modeling an aircraft project with some prototypes and a number of production units.  They wanted to make sure that they accounted for the cost of upgrading the Prototypes to Flight/Production units, while using a fairly detailed product breakdown structure.  So the Prototypes would be built up with an initial design, and then certain parts would be upgraded after the design was refined to become full flight units. 

Here are a few different ways to approach this issue:

1.       Additional Prototypes – The most simplified approach would involve accounting for the extra effort by adjusting the prototype quantity by a fractional amount (for each upgraded unit) to represent the additional manufacturing activities.  You could either apply the number of Additional Prototypes at the assembly level, or on the individual hardware components that will require modifications.

2.        Prototype Support Adjustment Factor –This input was created to account for situations where one would expect design/fabrication yield problems, where you may need design and build more than 1 design in order to get one prototype that works in the end (i.e. if you need 2 designs to get 1 good prototype, PROSUP = 2).  Prototype support Adjustment factor has an impact on all 3 development activities for hardware: Development Engineering and Development Manufacturing and Development Tooling and Test.  Because in this scenario, we would be developing, manufacturing, and testing one design for 1 complete prototype, and then making a slight modification to the design, altering certain parts, and finally testing those mods to upgrade the unit to the final design, the added effort for upgrading the initial build, could be accounted for by a fractional increase in PROSUP (maybe 1.2)

3.       Using a COTS product breakdown structure to account for modifications to existing hardware – The most complex (and most detailed) approach involves mimicking the initial product breakdown structure used to estimate development and production, but building it using COTS cost objects (with modification).  You would describe the product with the same (or at least similar) weights, complexities, Operating Specification, etc.,  and then for the objects that require modifications, apply a percentage to “percent of structure or electronics modified”.  Of course there would likely be no purchase price for these “COTS” items, because the items already exist based on the first prototype build, so Purchase Hardware Unit Cost and Prototype unit cost can be left at zero.  If the parts need to be re-integrated, you may use an assembly object to represent that effort, or if they do not, you may just use a folder object to group the items together.  This method allows you to isolate the costs of the upgrade from the other phases of development and production, which can allow for more granular reporting and planning.

Sometimes the approach depends on how much time you have to build your estimate, and how detailed the estimate needs to be for each phase of the project.  One of these approaches should provide you a reasonable estimate, depending on the level of time and details you have to work with.