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presented by: Chasing Affordability with Parametrics - A Perspective from United States Jason A. Dechoretz Senior Vice President, MCR LLC

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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

3

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].

4

5

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

5

Life Cycle Cost Defined

6

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

7

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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