epmc 2005-22b industry briefing giorgio accolti-gil ron shields - raytheon craig thompson - raytheon

EPMC 2005-22B Industry Briefing

Giorgio Accolti-GilRon Shields - RaytheonCraig Thompson - Raytheon

TOPICSWhat Motivates UsCompanyProgramPersonal How We Are Measured Barriers / Incentives

Raytheon CompanyRaytheon TechSvcs Company

B. EvenIntegrated Defense Systems

D. SmithIntelligence & Info Systems

M. KeebaughMissileSystems

L. FrancesconiNetwrk Centric Sys

C. SchottlaenderSpace andAirborne Systems

J. KelbleRaytheonChairman & CEO W.H. SwansonRaytheon Aircraft

J. SchusterCorp BD & International Ops

T. CulliganFinance

E. PlinerHuman Resources

K. PedenLegal

J. StephensInformation Technology

R. RhoadsContracts

J.D. HarrisCorp Affairs & Communications

P. PianoR6Sigma,CLO& Supply Chain

D. RonchiEngineering &Technology

G. SheltonRTN Company Evaluation Team

E. Franklin07/12/04Internal Audit

L. Harrington

Northrop Grumman Integrated SystemsPremier Aerospace and Defense Systems Integration EnterpriseElectronicSystemsInformationTechnologyIntegratedSystemsNewport NewsSpaceTechnologyShip SystemsBob IorizzoPresidentHerb AndersonPresidentScott SeymourPresidentTom SchievelbeinPresidentWesley Bush PresidentPhil Dur PresidentDon Winter PresidentMissionSystemsE-2C RMPEA-6BF-14C-2AEW & EW Systems Phil Teel Air Combat SystemsGary ErvinSteve Briggs DeputyF/A-18B-2F-35MP-RTIPAGS & BM SystemsAlan DoshierLeroy BarnidgeDeputy767 ISRALMDSCOBRANATO AGSAerial Common SensorUnmanned SystemsChris HernandezBob MitchellDeputy Fire ScoutTargetsJ-UCASWATCHKEEPERGlobal HawkE-10AE-8C JSTARSFSSSpace

Values and Key BehaviorsQualityLeadershipIntegrityPeopleSuppliersCustomer SatisfactionProductivityGrowthLive the Company ValuesFocus on Operating ExcellenceWe must focus on program performance to deliver on the full operating and financial potential of our company.Act With SpeedCommunicate OpenlyCollaborate Across the Company

*

PM Performance Measurement Yearly Performance Management PlanProgram Performance GoalsProduct QualityCustomer SatisfactionCPI/SPI/ Program PerformancePeople DevelopmentFinancial Goals AOPAcquisitionSalesMarginCashWorking Capital

Program PerformanceWhy Important?Resources Capital, New Business Investment, Facilities, Special RequirementsRewardsRetention

Exec Monthly Reviews of PerformanceHighlights & IssuesNew Business ActivitiesFinancial SummaryWatch Programs

December 2004 HighlightsReceived Milestone III Decision and FY05 Contract Award of $103M in December

Held Well Attended and Successful JSOW 1st Production Celebration in November. Keynote Speakers: RADM Charles Bert Johnson, CAPT David Dunaway, and Mr. Jon Jones JSOW Unitary

Successfully Completed Gate 7 and System Level PDR, with ActionsCritical Actions Related To Completing GEU Documentation /Clarifying Schedule UncertaintiesJSOW Block II

JSOW WingsRaPID

Proposal Submitted in December Team Working Towards Contract Award in Late March

Business Area Name03.22.04 *

Watch ProgramsWatch Programs

Instructions

Highlights for Watch, Top Risks, and Top Programs

Watch Programs

List all programs that fit the following criteria: production programs > $5M, development

programs > $1M, or any program that fits any of the criteria listed in the table

Answer Yes or No to both Strategic or Investment Program (Do not color)

Answer Yes or No to Fixed Price Development or 1st Production. If a program is a 1st Production

and cost type answer "yes". (Do Not Color)

If a column heading does not pertain to a program leave the box blank

If customer funding, requirement, or complex customer interface issues have been resolved fill

box green

If a program has been rebaselined please indicate the month and year. If it was a cause of our

performance mark red/yellow. If not, mark green.

Unfavorable Customer Metrics = Customer Satisfaction on Program Indicator Charts

Use arrows on colored boxes to show improvements or degredation.

Top Risk Programs

Top Risk Programs should be listed in the same order they appear on the Watch Programs slide

Include all programs listed on the Watch Programs slide, except those that are all green or in

proposal stage

Include all contracts associated with each program on the Watch Programs slide

CPI and SPI data is required for Current Month and ITD

Current CPI and SPI data is the latest input given to Dave More and Barbara Sousa

Prior values should be the same values listed for current month in last month's file

Calculate ITD CPI and SPI metrics only for the increment since a rebaseline if one has been done

The booking fee rate is the rate in the system being applied and should not be negative.

If there is a variance between the booking rate and the ECAC rate please explain and include

a plan detailing milestones to increase the booking rate to the current ECAC rate

ITD Total Cost, CPI, and SPI should be reflective of the time period the current month's CPI and

SPI were taken

If a program has been through a Program Independent Assessment (PIA) list date.

The Top Risk Programs data to be shown at the SAS Ops Review is on a separate tab.

Top Risk Programs - Detail

A tab should be created for each program listed on the Top Risk Programs slide and should

include details for all contracts associated with that program.

Make sure the most current values are used for CPI and SPI

Include current program highlights/issues, explanations for red/yellow areas, variance explanations

for changes in CPI and SPI, and differences between booking rates and ECAC current rates

The Top Programs data to be shown at the SAS Ops Review is on a separate tab.

EVMS History Top Risk Programs Graphs

A graph should be made for each program on the Top Risk Programs list

CPI/SPI data should match data in WinSite system

Graphs should include 12 months worth of history

Top Programs

Include a list of the major revenue generating programs (2004 revenue > $10M or strategic/critical

value to the company) that are not already on your Top Risk Programs chart

Include current month CPI and SPI values (the latest input to Dave More)

Provide explanations for changes in CPI and SPI and variances between booking rates and ECAC

current rates

The booking fee rate is the rate in the system being applied and should not be negative.

If there is a variance between the booking rate and the ECAC rate please explain and include

a plan detailing milestones to increase the booking rate to the current ECAC rate

ITD Total Cost should be reflective of the time period the current month's CPI and SPI were taken

Watch Programs

ContractStrategic/ Investment ProgramFixed Price Development or 1st ProductionCustomer Funding or Rqmts IssueComplex Customer InterfaceRebaselined ProgramDegrading EVM or PerformanceUnfavorable Customer Metrics

Contract AYes/NoYes

Contract BYes/YesFeb-04

Contract CNo/YesYes

Contract DYes/NoJun-04

Contract ENo/NoYes

Watch Programs

All Red & yellow contracts, plus all contracts fitting the criteria below. Refer to Appendix A for expanded definitions of these criteria.

This identifies which risk criteria are applicable to each Risk contract, measures the severity if the risk, and provides an indicator to show if the risk has worsened or improved. Include contracts that are being bid now that contain risk as defined above.

List top level programs as opposed to lower level projects contained within a particular program

Match Customer Satisfaction color in Program Indicator chart

If yes then list date of rebaseline; mark red/yellow if caused by our performance otherwise mark green

If yes then mark red/yellow if caused by or impacting our performance otherwise mark green if issues resolved

Answer Yes or No to both questions

Answer Yes or leave blank

Top Risk Programs

ECAC(Risk)/Opp(Risk)/Opp(Risk)/Opp

2004Cont.I-T-DBk. FeeCur.PriorLastCPI-MonthCPI-ITDSPI-MonthSPI-ITDWorst CaseMid-RangeBest Case

ContractSalesValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04Jan-04Feb-04Jan-04Feb-04PrCurPrCurPrCurTCPIPIA DateComment

Contract A100.0150.080.015.0%15.0%14.5%Jun-041.0098.001.0098.001.0098.001.0098.0014.0%14.0%15.0%15.0%16.0%16.0%99.00Jun-04

Contract B

Top Risk Programs

All Red & yellow contracts (do not include proposals) on Watch Programs. Note that CPI and SPI Data is required for current month and ITD. Current data is the latest input to Dave More.

Top Risk Chart For SAS Ops


Cont.I-T-DBk. FeeCur.PriorLastCPI-MonthSPI-MonthWorst CaseMid-RangeBest Case

ContractValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04PrCurPrCurPrCurPIA Date

Contract A150.080.015.0%15.0%14.5%Jun-041.0098.001.0098.0014.0%14.0%15.0%15.0%16.0%16.0%Jun-04

Contract B0.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

0.00.00.00.0%0.0%0.0%Dec-990.00.00.00.00.0%0.0%0.0%0.0%0.0%0.0%Dec-99

Top Risk Programs

This is the Top Risk Programs Data that is to be copied into the chart that is shown at the SAS Ops Review. Delete the formulas in the rows that do not contain a program.

Details Program A

Watch Programs Chart

Strategic/Fixed PriceCustomerUnfavorable

InvestmentDevelopment orFunding orCustomerRebaselinedDegrading EVMCustomer

ContractProgram1st ProductionRqmts IssueConcernsProgramor PerformanceMetrics

Contract AYes/NoYes

Top Risk Programs ChartECAC(Risk)/Opp(Risk)/Opp(Risk)/Opp


ContractSalesValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04Jan-04Feb-04Jan-04Feb-04PrCurPrCurPrCurTCPIPIA DateComments

Contract A100.00150.0080.0015.0%15.0%14.5%Jun-041.0098.001.0098.001.0098.001.0098.0014.0%14.0%15.0%15.0%16.0%16.0%99.00

Program Highlights/Issues

Examples:

Agreements madeWork Around Plans

Tests CompletedMilestones achieved

DeliveriesSchedule Issues

Integration Status

Staffing Issues

Techinical Issues

Customer Funding or Requirements Issue

Specific reasons for red or yellow

Difficult Customer


Rebasedlined Program

Specific reasons for red or yellow - provide dates of rebaselines

Degrading EVM Performance

Give detailed explanation

Unfavorable Customer Metrics


Changes in CPI and SPI

Give variance explanations for changes

Variances will be given to Dave More

Delta between Booking Fee Rate and Current ECAC Rate

Specific reasons for differences


Explanations addressing:Program Highlights/IssuesYellow and Red on Watch Programs ChartDetails as to why a program has degrading EVM PerformanceChanges in current vs. prior CPI, SPI (these explanations will be sent to Dave More)Differences between Booking Rate and Current ECAC Rate

This Chart can contain details for all contracts associated with 1 major program

Details Program B

Watch Programs Chart

Strategic/Fixed PriceCustomerUnfavorable

InvestmentDevelopment orFunding orCustomerRebaselinedDegrading EVMCustomer

ContractProgram1st ProductionRqmts IssueConcernsProgramor PerformanceMetrics

Contract BYes/Yes0

Top Risk Programs ChartECAC(Risk)/Opp(Risk)/Opp(Risk)/Opp


ContractSalesValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04Jan-04Feb-04Jan-04Feb-04PrCurPrCurPrCurTCPIPIA DateComments

Contract A100.00150.0080.0015.0%15.0%14.5%Jun-041.0098.001.0098.001.0098.001.0098.0014.0%14.0%15.0%15.0%16.0%16.0%99.00

Program Highlights/Issues

Examples:

Agreements madeWork Around Plans

Tests CompletedMilestones achieved

DeliveriesSchedule Issues

Integration Status

Staffing Issues

Techinical Issues

Customer Funding or Requirements Issue


Difficult Customer


Rebasedlined Program

Specific reasons for red or yellow - provide dates of rebaselines

Degrading EVM Performance

Give detailed explanation

Unfavorable Customer Metrics








Explanations addressing:Program Highlights/IssuesYellow and Red on Watch Programs ChartDetails as to why a program has degrading EVM PerformanceChanges in current vs. prior CPI, SPI (these explanations will be sent to Dave More)Differences between Booking Rate and Current ECAC Rate

This Chart can contain details for all contracts associated with 1 major program

EVMS History

Program AMarAprMayJunJulAugSepOctNovDecJanFeb

CPI Month1.2020.5740.9861.0950.9830.9911.0710.9390.9450.5000.9990.960

CPI I-T-D1.0040.9970.9970.9990.9990.9991.0000.9990.9970.9830.9840.982

SPI Month1.0000.2901.0000.6171.3710.3930.6951.6000.8380.7121.0511.100

SPI I-T-D0.9880.9660.9910.9750.9840.9620.9550.9640.9600.9630.9650.973

MarAprMayJunJulAugSepOctNovDecJanFeb

Program BCPI Month0.8120.7931.0001.0001.0391.0051.0011.0590.9101.1000.9190.913

CPI I-T-D0.8250.8230.9150.9981.0001.0000.9801.0210.9801.0060.9880.976

SPI Month0.8200.7521.0001.0001.0001.0201.0010.9180.8150.9950.8710.756

SPI I-T-D0.9150.9050.9550.9940.9991.0000.9880.9500.8990.9200.9100.883

EVMS History

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

CPI Month

CPI I-T-D

SPI Month

SPI I-T-D

CPI/SPI

Program A

Top Programs

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

0000

CPI Month

CPI I-T-D

SPI Month

SPI I-T-D

CPI/SPI

Program B

Top Programs Chart for SAS Ops



ContractSalesValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04Jan-04Feb-04Jan-04Feb-04PrCurPrCurPrCurTCPIPIA DateComment

Program A15.728.37.114.3%14.3%14.3%Sep-031.091.021.011.060.791.941.301.4014.3%14.3%15.3%15.3%15.3%15.3%0.99Mar-04

Program B75.6151.092.614.8%14.8%13.3%Nov-030.900.911.041.110.950.981.061.078.2%8.2%14.8%14.7%15.7%15.7%0.01






EVMS History Top Risk Programs

A graph should be made for each program on the Top Risks Programs list.

Top Programs

Update for the top 10 revenue generating programs in your program area. Note that current month and ITD CPI/SPI data is required. Current data is the latest input to Dave More. Provide explanations for changes in CPI/SPI data and differences between Current Fee Booking Rate and Current ECAC Rate.


2004Cont.I-T-DBk. FeeCur.PriorLastCPI-MonthSPI-MonthWorst CaseMid-RangeBest Case

ContractSalesValueTCLRateRateRateSign-offJan-04Feb-04Jan-04Feb-04PrCurPrCurPrCur

Program A15.728.37.114.3%14.3%14.3%Sep-031.091.020.791.9414.3%14.3%15.3%15.3%15.3%15.3%

Program B75.6151.092.614.8%14.8%13.3%Nov-030.900.910.950.988.2%8.2%14.8%14.7%15.7%15.7%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

0.00.00.00.00.0%0.0%0.0%Dec-990.000.000.000.000.0%0.0%0.0%0.0%0.0%0.0%

Top Programs

This is the Top Programs Data that is to be copied into the chart that is shown at the SAS Ops Review. Delete the formulas in the rows that do not contain a program.


EVMS History Top Risk ProgramsAdd comments in a format similar to this to highlight performance drivers.Add comments in a format similar to this to highlight performance drivers.Add bold black line to mark 1.0 on plot


Program Performance1 = AAAAAASPI=1.00 CPI=1.162 = BBBBBBSPI = 1.21 CPI = 1.023 = CCCCCCCSPI = 0.91 CPI = 1.004 = DDDDDDDSPI = .98 CPI = 1.515 = EEEEEEEESPI = 1.33 CPI = 1.036 = FFFFFFFFSPI = 1.25 CPI = 1.037 = GGGGGGGGSPI = 1.04 CPI = 1.20SPI10Ahead of Schedule and Underspent0.860.880.900.920.940.960.981.001.021.041.061.081.101.121.140.860.880.900.920.940.960.981.001.021.041.061.081.101.121.14Behind Schedule and OverspentBehind Schedule and UnderspentAhead of Schedule and Overspent276 5273549 151112 24 4016 17 20 33 41262512213CPI82128343218 19 29373814233130363Customer has requested a change to the existing contract; re-baselineLate Reqmts change approval resulting in a two month slipPSP:Procurement Support 3 Heads over Jan Plan39Customer re-prioritization Brass board availability impacted SW integration & TestExcess Matl driving cost grow. To be moved to upon receipt of future ContractsUse Unchanged for CPI/SPI variation less than 0.02Notations required for all programs with CPI < 0.95 or SPI < 0.95


Program IndicatorsLegend:ExceptionalBMarginalYUnsatisfactoryRG SatisfactoryVery GoodPContractPlanOutlook (3mo)CostScheduleTechnicalQuality2004Sales($M)CustomerSatisfactionInternal& ExternalSuppliersStaffingProgram NameContract TypeYYYYGYYYYYYGGGGGGGOne month behindOpen CDR ActionsEngr. SoftwarereleaseProgram X$21GGGRequired for each program in Program Area (in particular, all programs in EVMS system); Make sure indicators match data in Watch Programs, Top Risk Programs, and Top Programs listYYYYGYYYYYYGGGGGGGTwo months behindOpen TRR ActionsProgram Y$56GGG

HVMSProgram Health Visibility Management System

CompensationPay Structures / Grades$25K - $250KAnnual Merit (0 10%)IndPromotion (2 10%)IndResults Sharing 3%Comp/DivBonus (Exec)Comp/Div/IndStock/OptionsIndEducationMedical

Financial PlanningProgram Five Year Financial Plan- locked mid 2004Program AnnualOperatingPlanGroup andCompanyAOPStock Valuation- Earnings- Earnings Growth- Overall Growth- Stability

*

Disconnects Between Margin & CashMYTHOperating margin for a given year equals the cash for that year.Cash Received Is Not the Same As Margin RecordedNot All Sales and Expenses Recorded on the Income Statement for a Given Year Will Be Collected and Paid in That Year. Write-Offs of Costs and Goodwill Associated With Un-Recoverable InvestmentsDepreciation Associated With the Capital Asset Base Taxes Shown on the P&L Are Not a Cash ExpenseMargin Doesnt Reflect Changes in Working Capital

*

Performance Perspective of the BusinessAccounting Perspective

Sales- Cost of SalesOperating Margin+/- Other Income- TaxesNet MarginShareholder PerspectiveASSETSEMPLOYEDCASHGENERATEDCurrent & Future Cash Flows

THE VALUE OF THE BUSINESSTHE INVESTMENT IN THE BUSINESSAre These Perspectives Consistent ?Earnings PerSharePP&EInventoryAccnts Rec.Cap Exp.OverheadDebt

*

Investors View Value DifferentlyValue Focus On Valuation Cash Flow, Return On Capital, Value Of Assets/Hidden Assets ImportantGARP (Growth At A Reasonable Price)Mixture Of Growth And ValueGrowth Focus On Growth Rates Valuation Highly Dependent On Future ExpectationsMomentum Buy If Stock Is Rising, Sell If Declining The Market Knows Dont Fight The TrendIndexWhy Dont All Investors Buy the Same Stock?Different Value Metrics, Risk Preferences and Uncertainty About the Future

*

Investors Look ForwardInvestor interest driven by:Expectations of future growth

Mergers and acquisition activity

Health of the general economy / stock market (alternatives)

What Conditions Drive Investors Perception of Defense

Pierre A. Chao Senior Fellow and Director Defense-Industrial InitiativesPositiveBudget IncreasesThreatsTechnical InventionsInflation

NegativeActual ConflictLarge Budget DeficitsEconomic Downturn

*

Perspectives of GrowthObtain a Value Creating Condition (Competitive Advantage)

Invest In Additional Assets (Left Side of the Scale)

Growth in Value of BusinessAccounting GrowthValue GrowthSalesInvest to Increase - Cost of SalesProportionally Incr. to Sales Operating MarginMargin Growth

*

What Are the Program Management Implications?Reduce the Time Between the Start of Investment & Receipt of Customer Payments (Cycle-time)Increase Cash Flow Through the Organization Plan Capacity & Minimize Capital InvestmentsOptimize the Cash Flow (Organization) Process Vs. Maximize an ElementCash Discounting Analysis Methods Recognizes that the Future is Uncertain Cash Flow in the Near Future is Worth More that the Same Cash Flow LaterA Good Analysis Includes Management Examination of Program Assumptions & Risk ManagementHow the Program is Executed Over Time Affects Economic Results Strategy & Execution are Fundamental !!

Barriers / IncentivesCPARSExecutive Communication Good/BadFlexibility Relationships VitalTechnical TradesFinancialProgrammaticsProfit gives flexibility, can investOverreact Factor Enron/EACs, Test Failures, DruyanCheerleading

*

Customer Sat

Barriers / Incentives (2)Supplier VisitsPerformance Based Payments / CashPerformance SpecGovt/Contractor Problem IndividualsTeam Reinforcement Good Times & BadGovt Individual/Team AwardsMultiyearRemove PMIncentivize Cost Reduction

Barriers / Incentives (3)Clear Govt/Contractor HurdlesPatriotismGood Press/Bad PressDocumentation of DecisionsGFPProblems Obsolescence, FailuresAward Fee good and badInternational help us, profit, stability

121. Strategic ProgramsPerceived must win programsPop up opportunitiesUnique Terms and Conditions or Business Arrangement including schedule, payments, warranties or liabilitiesInvestments or payback required on future lotsSignificant work performed on IOTsInterdependencies with other programs or IR&D projectsNew technology required

2. Fixed Price Development or First Time ProductionConcurrent development and productionPriced production options added to a development programAccelerated schedule inconsistent with previous experienceSignificant assumptions on reuse (software or hardware) or COTS/NDI Involving a site with difficulty in transition to production

3. Customer Funding or Requirements IssuesFunding profile unstable or inadequate Staffing concerns with skills, experience or quantity (team health) Programs impacted by competitor protests Customer Funding Requests (CFRs)

4. Customer (Dom or Int'l) with a History of Difficult RelationshipsDegrading operating environment Significant currency or other financial market risksOffset requirementsTechnology export risk5. Rebaselined ProgramsAny program rebaselined more than once or during the first12 months of the contractPrograms not meeting the requirements of the ECAC policyContracts undefinitized for > 90 days

6. Degrading EVMS/PerformanceCPI/SPI decreasing by > 10% in any 2 periodsECAC degradation of > $1M or 10% or TCL value or more than one reduction to the booked fee positionProgram (or a related IDP) not following IPDS gate processWhen incremental TCPI and CPI vary by > 10 pointsMultiple red teams Fail test of production readinessMultiple program management changesPoor on-time delivery performanceGate 5 review issues poor integrated material program plan, lack of integrated IMP/IMS, EVMS only used as a reporting tool

7. Unfavorable Customer Metrics or RelationshipsCPARs/IPARs with multiple yellow/any red scoresAward fee degradation from prior period or less than that assumedin program ECACOpen claims (customer or supplier) >500kDegrading supplier or subcontract quality indicatorsOperational or flight test failuresMultiple contract modificationsShow cause lettersConsecutive months of degrading QPI indexUse View Notes Page to see additional information/clarification.12GRRUse View Notes Page to see additional information/clarification.Stoplight description:11

epmc 2005-22b industry briefing giorgio accolti-gil ron shields - raytheon craig thompson - raytheon

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