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presented by:
Chasing Affordability with Parametrics -A Perspective from United States
Jason A. DechoretzSenior Vice President, MCR LLC
Presentation Outline
• Introduction• Using Parametrics: A Historical
Perspective• A Process That Works
– Changing the Culture– Timing is Critical– Expanding Use of Parametric Models– Setting Cost Goals– Dealing with Uncertainty– Incentivizing the Participants– Tracking Success
• Success– US Army– NASA
• Where are We Today?• Acronyms
2
• Issues today (USA)– Government deficits require spending reductions– Program requirements dominated by User demands
• Result of performance-based requirements process• Budgets allocated via separate decision support systems• Design decisions not benefit from understanding
cost/schedule/performance relationships– Mounting Total Ownership Cost (TOC) obligations
• Program Managers incentivized to focus on IOC and FOC deliveries• Exasperated by disregard for O&S phase
• Affordability forced back into decision making
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Introduction
Affordability Defined
Cost becomes an Engineering ConstraintDesign Converges on the Cost Goals
• Affordability can be defined as “the engineering process or management discipline which assures the final system [or program, project, product, service] can be delivered [or owned, operated, developed, produced] at a cost which meets previously-established funding [or best value] constraints while still meeting all approved requirements [or standards, needs, specifications]. – The developer may determine that one or more requirements cannot
be assured within the funding constraint and may challenge that requirement as being unaffordable. Useful affordability tools include parametric cost estimating models, historic cost databases, and cost trade processes. But, we must first understand what the LCC requirement is based upon [it cannot be arbitrary].
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Using Parametrics:A Historical Perspective
• 1970’s – DTC– Focus on production cost– No user involvement– No affordability goals– No risk consideration– Initiative Dropped
• 1990’s – CAIV– CAIV Flagship Programs– User is stakeholder– Realistic but aggressive goals– Emphasis on cost trades; focus on cost drivers
• 2000’s – TOC– Focus on Total Ownership Cost (TOC) – Whole Life Cost; consider early
investment for later savings– Joint cost and schedule risk
• 2010’s – Integrating Models & Portfolio Management– Resource forecasting (cost & schedule) to performance modeling– Trading requirements, functionality, and resources across programs
Performance AND Cost GoalsDetermine Design
New Paradigm
UserRequirements
Old Paradigm
Performance Determines DesignTHEN
Design Determines Cost
UserRequirements
Time Time
CostGrowth
CostReduction
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A Process That Works – part 1
• Changing the Culture– Acceptance of parametrics: Paremetrics Estimating Initiative (PEI) &
modifying procurement rules– “…most powerful influence on development costs is the culture of
developing organization” NASA quote
• Timing is Everything– Establish cost targets during
Preliminary Design or Engineering phase
– Negotiate cost and performance targets early
Concept Development
Preliminary Design
Detailed Design
Prototype Build
Limited Production
Full Scale Production
COST
REDUCTION
POTENTIAL
TIME
Target Costing – Sony WalkmanParadigm shift:cost plus to price minus
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A Process That Works – part 2
• Expanding Use of Parametric Models– Identification and quantification of
cost drivers– Dynamic link to design models– Measuring cost and schedule
impact of technology maturation using TRLs
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Candidate Technology Readiness Levels
Level 1 Basic principles observed and reported
Level 2 Technology concept and/or application formulated
Level 3 Analytical and experimental critical function and/or characteristic proof of concept
Level 4 Component and/or breadboard validation in laboratory environment
Level 5 Component and/or breadboard validation in relevant environment
Level 6 System/subsystem model or prototype demonstration in a relevant environment
Level 7 System prototype demonstration in a operational environment
Level 8 Actual system completed and qualified through test and demonstration
Level 9 Actual system proven through successful mission operations
Linking Design Models To Parametric Models
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ACES - ISETIPAT
VisualizationATSV – Trade space
STK, SOAP
• Enhanced SMAD• Space Vehicle Design• Space Vehicle Propulsion
• Orbit Propagation• Radiation Exposure• Detector Response
Advanced Cost Model• Life Cycle Cost • Budgets & Schedules• TRL• Cost Growth & Risk
Concept of Operations (ConOps)• Mission• Infrastructure• Resources
Historical/Knowledge Database
• Launch Vehicle Design• Launch Vehicle Propulsion• Trajectory analysis (POST)• Hypersonics
Launch Vehicles / Strategic Missiles Space Vehicles
SSCS• Life Cycle Cost • Budgets & Schedules• TRL• Cost Growth & Risk
SMAD CESMO
Labor Model
Design
DevelopmentProduction
Costs
Operations & Maintenance Costs
Trade SpaceOptimization
Existing LV Database
The Space Segment Cost and Schedule Model provides space vehicle cost, schedule, and risk modeling including CERs from USCM, SSCM, NICM, APTDICM, SEER, COCOMO II, AFCAA, and Aerospace models.
The Space Mission Analysis & Design (SMAD) tool from TSTI provides space vehicle modeling
The Integrated Propulsion Analysis Tool (IPAT) provides launch vehicle modeling. • Delta• Atlas• Minotaur• Falcon 1• Taurus• Pegasus
The Advanced Cost Modeling (ACM) tool from Advatech provides launch vehicle cost and risk modeling
A Process That Works – part 3
• Setting Cost Goals (closing the trade space)– How much is it worth, Value for
Money (VfM)? – Quantify impact of risk– Seeking the optimized solution – not
the cheapest, not the fastest, but the “best value solution” at an acceptable risk
• Dealing with Risk– Tolerance of targets– Uncertainty of estimates (goals need
not be absolute)– Measure trade study products at
consistent confidence level
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Cost
Perf
orm
ance
Objective Threshold
Objective
Threshold
TradeSpace
Cost
Perf
orm
ance
Objective Threshold
Objective
Threshold
TradeSpace
Trade Study Alternatives @ 80% Confidence
.000
.250
.500
.750
1.000
2,045 2,443 2,841 3,238 3,636
Alt 1
Alt 2
Alt 3
A Process That Works – part 4
• Incentivizing the Participants (clearly identifying the goal)– Early user involvement– Using contract types
• Cost Sharing• Fixed Price Incentive Fee (TOC, IOC dates)
– Performance measured as part of Earned Value Management
• Tracking Success– Weakness of future targets– Solution of the glide path– What determines the curve’s shape?
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Success - for the U S Army
• Success came with culture change– Engineers acknowledge importance of cost– Operators reduce number of requirements;
and, all are tradable
• Crusader (CAIV pilot program)– 1/3 reduction in recurring cost
• User agreed to relax major firepower (ammunition transfer) requirement
• Engine located to facilitate maintenance• Commercial standards where appropriate
– Top Army CAIV program• Program elements continue today as a result of
affordability demonstrations
• Parametric models supported all trade studies
02468
1012141618
Negotiated, Aggressive but AchievableURC Goal
Significant DecreaseDue to CAIV
Development Period
Uni
t Rol
law
ay C
ost (
$M)
02468
1012141618
Negotiated, Aggressive but AchievableURC Goal
Significant DecreaseDue to CAIV
Development Period
Uni
t Rol
law
ay C
ost (
$M)
KPP Objective Threshold Rate of fire 12 rds/min 10 rds/min Range 50 km 40 km Cross Country Speed 48 kph 40 kph Highway Speed 78 kph 67 kph Mean time between service actions
68 hrs 62 hrs
Ammunition transfer 60 rds < 12 mins
60 rds in 12 mins
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Success – for NASA
• Constellation Trade Study -Reduce reliance on ground tracking stations– Used primarily
during launch– Considered five
alternatives to baseline
– Solution driven by operations cost
• Parametric and Activity-based cost models used
• Impact on NASA– Culture change– Development of CAIV Plan
• Goals, risk, trades
– CAIV is engineering’s responsibility
Cost by Option
$-$20$40$60$80
$100$120$140$160$180
1. Baseline- GroundStations
Only
2. CSI -Ground
and TDRS
3. SCaN -Ground
and TDRS
4a. Stretch- TDRS
Only
4b. Stretch- TDRSOnly, noCLV link
5 - TDRSand AFassets
Mill
iion
Dol
lars
(FY0
7$)
total recurring sustaining costtotal recurring mission costtotal non recurring cost
Orion
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Where Are We Today?
• Cost engineers have implemented ‘CAIV’ process at DoD and NASA– Becomes the new ‘…business as usual’ to drive towards affordability– Cost independent ‘…as long as performance is not unduly sacrificed’– Initiation of Cost IPTs in multiple domain: Space, aircraft, ships
• Lessons Learned– Plan: responsibility, authority, incentivize– Requirements: minimize KPPs, all are tradable– Metrics: negotiate, flow-down, define as a range, track– Trade studies: formalize inter-model relationships, always quantify risk– Organization’s culture: changed through training
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Acronyms
ACES Advanced Computational Engineering SimulatorCAIV Cost As an Independent VariableDTC Design To CostFOC Full Operating ConditionIOC Initial Operating ConditionIPAT Integrated Propulsion Analysis ToolISET Integrated Space Engineering ToolKPP Key Performance ParameterLCC Life Cycle CostO&S Operations and SupportSMAD Space Mission Analysis and DesignSSCS Space Segment Cost and ScheduleTOC Total Ownership CostVfM Value for MoneyWLC Whole Life Cost
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