WHC-SA-2931 -FP

Inf ormation/Records Management- Defensible Budgets for the 21st Century

A. J. DiLiberto L. A. Whittet

Date Published August 1995

To Be Presented at NIRMA '95 19th Annual Symposium

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Prepared for the U.S. Department of Energy Off ice of Environmental Restoration and Waste Management

Westinghouse P.0 Box 1970 Hanford Company Richland, Washington

Hanford Operations and Engineering Contractor for the U.S. Department of Energy under Contract DE-AC06-87RL10930

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INFORMATION/RECORDS MANAGEMENT-DEFENSIBLE BUDGETS FOR THE 21ST CENTURY

PURPOSE

This paper provides to the Nuclear Information and Records Management

It includes a detailed basis of Association (NIRMA) members the skills, knowledge, and information needed to develop performance-based cost estimating. estimates to represent a work breakdown structure that is technically complete , fully documented, defensible to various external reviews , and Val idatable.

SCOPE

This paper applies to all NIRMA personnel involved in planning, scheduling, and cost estimating and shall be used to develop activity-based cost (ABC) estimating in the budget baselining, rebaselining, and change request processes. contractors, these are activity 'data sheet (ADS) and multi-year program plan (MYPP) processes.]

[For the U.S. Department of Energy (DOE) and its

RESPONSIBILITIES

Information/Records Manager (IRM). is responsible for determining technical scope, analyzing functional performance requirements and technical standards, generating a work breakdown structure (WBS), determining schedule milestones, and developing cost estimates/bases of estimates. recommended, the IRM changes the estimates as needed.

As a Cost Account Manager (CAM), the IRM

As reviews are completed and assessments are

DEFINITIONS

Activity-Based Cost (ABC) Estimate. Cost estimating technique based on defining activities required to conduct a task and relating each identified activity to quantity, labor, material, and subcontract requirements. ABC estimating is a cost-estimating method that breaks work into discrete, quantifiable activities.

Activity (Task). An activity has the following characterist

It represents units of work at levels where work

It is clearly distinguished from all other tasks

cs:

is performed.

It is assignable to a single organizational element.

It has scheduled start and completion dates and, as applicable, interim milestones, all o f which represent physical accomplishments.

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It has a budget or assigned value expressed in dollars, work hours, or other measurable units.

Its duration is subdivided into-discrete value milestones to facilitate the objective measurement of work performed.

It can be integrated'with detailed schedules (e.9. ,' engineering or construction).

Cost Estimate Category. presentation.)

(We will discuss only baseline estimates in this

Baseline Estimate (BE). that serves as the basis for measuring cost performance of the organization accomplishing an activity. compared to the baseline estimate to assess cost performance. The baseline estimate may be a conceptual design estimate o r subsequent est mate.

Cost Estimating Methods. (We will discuss only the definitive method in this presentation.)

Cost estimate prepared before the work is initiated

The actual costs o f performing the work are

Definitive Method. definition or detailed design to list all labor and materials required to complete the program activity. detail available, then summarized upward through the WBS.

This method of cost estimating uses a detailed scope

Costs are estimated at the lowest level of

Cost Estimating Techniques. [ABC or Level of Effort (LOE).]

Level o f Effort (LOE). staffing level required to perform the program activity.

Cost estimating technique based on identifying the

Work Breakdown Structure (WBS). A mu1 ti-tiered framework that organizes and graphically displays elements representing work to be accomplished in logical re1 ationships.

Closed-Loop Approach. An approach that encompasses the IRM, responsible budget analyst, responsible scheduler, and any other designees responsible for completing all applicable budget requirements (sometimes known as the core team).

Requirement Case. Also referred to as the planning case or compliance case; represents a program planning baseline that includes all safety and compliance activities. required by legal or safety requirements should be justified on programmatic, technical, cost-effectiveness, and/or efficiency grounds.

Any activities included in the requirement case that are not

Target Case. The Target Case represents a comprehensive Office o f Environmental Restoration and Waste Management (EM) program-based on Office of Management and Budget (OMB) budget mark and outyear budget constraints. The activities reflected in this case are those that can be performed at the constrained budget level with a focus on completing high-priori ty safety and compliance activities.

GENERAL

Developing the Technical Scope/WBS. The completed estimate package consists of a technical scope, cost estimate, and schedule. The planning process provides the requis i te level of detai l for program def ini t ion developed from the mission need. terms of performance c r i t e r i a and requirements for the program. specific WBS developed during cost estimating divides the technical scope of work into d iscre te , identifiable, and logically defined tasks.

The technical scope should be developed and expressed in The estimate-

I n developing the cost estimate, including the basis o f estimate, the IRMs shall prepare the WBS in a c lear , consistent, comprehensive format tha t f a c i l i t a t e s review of detai ls and assumptions t h r o u g h o u t the validation process. cost estimate methodology used.

Act ivi t ies t o be costed shall be identified in detai l t o support the

In developing an estimate for an ongoing operation, his tor ical d a t a describing the cost associated with a l l a c t iv i t i e s mus t be researched and summarized. expenditures, equipment costs, and subcontracting costs for each ac t iv i ty . Also, the I R M needs a summary of the number of work units performed during the period being considered. Time records describing the amount o f l a b o r expended on various a c t i v i t i e s may be available from time cards. Material costs can be obtained from purchase receipts and requisit ion records. Because, in the p a s t , labor and materials have n o t been specif ical ly assigned t o a c t i v i t i e s , an engineering (best) judgement in assigning cost may be employed.

The types of d a t a needed include time records, material

Each major portion of the cost estimate should have backup documentation i n a program f i l e t h a t explains the assumptions and calculations on which the estimate i s based. The following information should be kept in the central f i l e that can be readily accessed by e i the r internal or external reviewers.

Rationale or logic used t o identify ac t iv i t i e s

Actual historical data from on-going operations

E x p l a n a t i o n o f the ra t ionale and assumptions used t o develop the t a s k schedule, milestones, and resource loading charac te r i s t ics o f the estimate

Changes t o any pa r t o f the cost estimate t h a t occur during i t s development (e.g.'? because o f a change i n technical scope) o r a f t e r i t s completion

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NOTE: The presentation will highlight the general section by using previously tes ted forms and checklists.

PROCESS

The baselining activities are conducted through the Long-Range Planning Process (LRPP). annually.

NOTE: Concurrent with the development with the LRPP, information should be processed t o your specific scheduling system as well as in the .

accounting system. between the accounting and scheduling systems with the LRPP.

This process can be a 1- to 7-year plan that is updated

This process will ensure accuracy and consistency

1.

2.

3.

4 .

5.

6.

7.

Descriotion/Activity

Develop scope/action pl an and identify key personnel to participate in completing the LRPP process. Initiate kick-off meeting to provide training, guidance and forms required for completing the assignment to responsible key personnel (CAMs, administrators, analysis , and schedul ers) . Prepare and submit Requirement Case, cost estimate/basis o f estimate forms (see Figures 1 and 2) as well as the CAP summary form (see Figure 3). A1 1 historical /backup documentation required to explain the cost estimate shall accompany the Requirement Case. Review the Requirement Case for compliance and update/complete as necessary.

Input Requirement Case into respective Schedule Module and produce LRPP Requirement Case Schedul e. Develop LRPP Target Case, validate program priorities, identify possible productivity commitment candidates and low-priority workscope; Review Target Case with CAMs and make changes as necessary. Final i ze Target Case.

Action IRM Core Team

IRM Core Team

I RM/ Key Per son n e 1 (CAMs , Program Admi ni strators , Budget Analysts, Schedul ers)

IRM Core Team

Scheduler

IRM Core Team

IRM Core Team

Descriotion/Activity Act i on

8. Input Target Case into respective IRM Core Team Schedule Module LRPP Target Case Schedule.

data, initiate central file location, and redline current LRPP with revised text, milestones, and budget data. Finalize new update of LRPP for approval and basis of budget year work authorization.

level management for review and approval.

9. Summarize all fiscal year LRPP IRM Core Team

10. Submit fiscal year LRPP to upper- IRM core Team

LESSONS LEARNED

The Westinghouse Hanford Company Liquid Effluents Services Program at the the Hanford Site implemented the techniques presented here, thus resolving concerns that the Department of Energy (DOE) had by establishing a formal method of preparing cost estimates with descriptive assumptions that justify their respective budgets.

- NOTE: WHC-Liquid Effluents Services (LES)-specific examples w‘ill be addressed in the presentation.

SUMMARY

It i s in the direct interest o f the IRMs t o prepare well-documented and justifiable cost estimates for the following reasons.

0’ Well-documented cost estimates reflect adequate planning and scoping.

Well-defined cost estimates provide IRMs with well technical scope, schedule, and cost baselines from organization can be managed.

Well documented cost estimates are defensib’le and organization. ability to receive required funding.

l i I defined which the

ncrease the IRM

Sound estimates limit the opportunity for upper-level management or the client (in some cases) to recommend spending cuts, thereby diverting funds, to better ~1 anned programs or departments.

t CONCLUSION

The implementation o f the techniques presented in this paper will:

Provide IRMs with information to better manage. Ensure defensible cost estimates. Allocate program resources tied to activities.

FORMS

Cost Estimate/Basis o f Estimate (Pg. 1 o f 2) (Figure 1) Cost Estimate/Basis o f Estimate (Pg. 2 o f 2) (Figure 2) Cost Account Plan Checklist (Figure 3).

REFERENCES

DOE, 1994, Cost & Schedule Estimating Guide, EM-30, U . S . Department o f Energy, Office o f Waste Management, Washington, D.C.

- Figure 1. Liquid Effluents Services Cost Estinate/Basis o f Estimate Form (Sub-Tasks).

FiguFe 2 . Liquid E f f l u e n t s S e n i c e s Cost E s t i m a t e / B a s i s - o f E s t i m a t e . (Scope, M i l e s t o n e s , Assumptions, Nan-Labor Breakdown).

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Figure 3. Liquid Effluents Services Cost Estimating Punchlist.

FORM 6.3 LIQUID EFFLUENTS SERVICES COST ESTIl4ATING PUNCHLIST SUB- ELEMENT

CAP NUMBER

COST ESTIMATE CONTENT

1.

2 .

3.

4 .

5.

ESTIMATE STAGE -

ESTIMATE CATEGORY -

PERIOD - OCTOBER 1, 199X - SEPTEMBER 30, 199X

PURPOSE -The purpose of this estimate is to provide a cost baseline for the

validated under the DOE guidelines. II

I' organization which can be

INTENDED USE - The cost estimate is to be used for budget formulation of the I' " organization with the Liquid E f f l u e n t s Program and as the c o s t baseline.

TECHNICAL SCOPE

1. WORK PROCESS

The I' I I organization i s responsible f o r :

0.

c

NOTE: Obtain the electronic copy of this form from your financial or program business representative. Page 1 of 5

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2 .

3.

4.

5.

INCLUDED ACT I V I T I ES

Activities (work pzckzges) under the operations o f this organization are:

0

EXCLUDED A C T I V I T I E S

POL I CY D R I V E RS / R EOU I R Et4 ENTS

0

0

ASSOCIATED .RISK

Risk associated with not performing the work described in this document are :

0

0

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. 6. CONTINGENCY DEVELOPMENT

7.ESCALATION FACTORS/SOURCE

8. ASSUMPTIONS . See "Assumption Sections" for each specific task (activity) under the -

included in C o s t Estimate/Basis of Estimate Work Sheets.

associated work packages

9. PARAMETERS/CONSTRAINTS

Applicability

Unusual faci 1 i ty features Safety requirements Project management Construction management Q W Q C Training Permitting Facility inspections

GIork shift/differential Overtime a1 1 ocati on Crew mix Regulatory compliance Rpts.

METHODOLOGY

[ 1 Analogy [ 3 Parametric

Y N Y N

Security [ I [ I [ I E l [ I [ I [ I [ I [ I [ I

[ 3 tax insurance) [ I [ I

Vendor quotes [ I [ I Subcontractor quotes [ I [ I Dress requirements [ I [ I

Radiological environment [ 3 [ 3 We at her condi ti ons Ilateri a1 sources Work type & amount Resource constraints Special tools & equipment [ 3 Indirect costs (fringe,

Other (Describe below) [ ] [ 3

[ 3 Definitive [ ] Trend Analysis

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EXPLANATION

1.

2.

3.

4 .

5.

W 0 R K B R EA K DO I4 N S T R U C TU R E

The DOE work breakdown structure code for the

designator the work has been divided into

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'I organization i s WBS . Under t h i s WBS work packages.

Work u n d e r each work package (WP) h a s been characterized into d i sc re t e ABC a c t i v i t i e s ( t a sks ) , as shoim on the Cost Estimate/Basis of Estimate Worksheets, contained in this estimate. The ac t iv i t i e s ( tasks) a re the level a t which costs are t o be tracked. Act ivi t ies , under the ABC costing system, correspond t o tasks i n FDS. Each ac t iv i ty (task) will be assigned a TPCN number for interface with the FDS system.

The WBS s t ructure i s depicted in Figure A . A description of each work package, ac t iv i ty (task) and subsequent sub- tasks , ident i f ied by department personnel during the interview process i s contained in t h i s pac,kage.

LABOR RATES

Labor r a t e s are established and published in FDS - Budget Report. The overhead (OH) r a te then i s applied in the l a b o r database t o yield the hourly r a t e used i n the estimate. Application of the General and Administrative (G&A) and Sitewide S u p p o r t Pool (SSP) i s done a t the summary level o f each sub-element (cost account), which i s automatically done i n the FDS module.

HATER I ALS /SUP PL I ES / EOU I PMENT/SUB-CONTRACT

Materi a1 s , suppl ies , equipment, subcontract (purchased services) are detai led specif ical ly t o each sub-task within the task package contained in the Cost Estimating/Basis o f Estimate Worksheets;

VENDOR OUOTATIONS

See attached applicable vendor quotations, sorted by tasks within each work package for

HISTORICAL COMPARISONS/COST ESTIMATE REBASELINE DEVELOPMENT

For the development of the cost estimate, a review o f ADS 1

Subactivity , 'I I' was conducted, and where appropriate, historical data (labor records, archived FDS reports , CAPS) were used t o support the estimate.

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\l!ORi( GREAKDOlr'N STRUCTURE

0 RG A ti I ZAT I ON

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"FIGURE A"