Cost analysis

COST ANALYSISCOST MANAGEMENT BASICS

Agenda

• Cost Estimating• Types of Cost• Normalization and Inflation• Risk Assessment• Cost Estimating Methods• Labor Costing• Optimization• Statistical Analysis• Tools

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Cost Estimating

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Cost:• The monetary representation of resources used or sacrificed, and

liabilities incurred to achieve an objective– Example:

The resources expended in acquiring or producing a good The resources expended in performing an activity or service

Cost Estimating: • The process of collecting and analyzing data and applying quantitative

models, techniques, tools, and databases to estimate the future cost of an item, product, program, or task

Cost and Cost Estimating Definition

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Cost estimating is thought by some to be difficult, but the skills and knowledge are logical and straightforward.

• Enable managers to:– Make resource-informed decisions– Develop and defend budgets– Identify specific cost drivers– Improve cost controls

• Translate system/functional needs associated with programs, projects, proposals, or processes into costs

• Determine and communicate a realistic view of the probable costs, which will be used to inform the decision-making process.

Purpose of Cost Estimating

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• Well documented – Includes source data and its significance– Clear and detailed calculations and results– Contains explanations for choosing a particular method or reference

• Comprehensive – Ensures a level of detail where cost elements are neither omitted nor

double counted

• Accurate – Avoids bias and overly conservative or optimistic estimates– Bases its assessments on most likely scenarios and assumptions

• Credible– Discusses any limitations of the analysis deriving from the uncertainty/bias

of the data or assumptions

Characteristics of a Good Cost Estimate

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• Sunk Costs• Opportunity Costs• Marginal Costs• Average Costs

Types of Cost

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Example: Paul is assembling his new home theatre system. He has spent 5 hours thus far and estimates he will complete the assembly in 2 more hours. Joan informs him he is doing it the hard way and describes a simpler approach which will take one hour to undo his

work and re-assemble the system.

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Sunk Costs

• Costs that have already been incurred and cannot be changed no matter what action is taken in the future are called Sunk Costs

Opportunity Costs

Example: The opportunity cost of accepting a job is forgoing the opportunity to do something else with

our time If our best alternative to working is playing golf the

opportunity cost of working is the forgone opportunity of playing golf

If the opportunity to play golf has a value greater than the benefits of working we will choose to play golf

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• The size of a foregone opportunity of using a resource is the Opportunity Cost

Marginal Costs

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• Marginal Costs are the costs to produce one more additional unit or output

• The slope of the ‘Total Cost Curve’ at any given level of production is the marginal cost for one more unit

• Marginal costs are highest at very low output rates and at output rates near capacity

Marginal Costs

Output

Total (£)

Total cost

High marginal costs

A

CHigh marginal costs

BLowest marginal costs

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Average Costs

• Average Cost is calculated by dividing the total cost by the total units produced

• Average Cost is very high at low levels of output

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Definition: Factors, activities, or events that cause costs to be incurred Usually can be quantified/measured - e.g., number of hours spent on a

task, supported population Analyst should identify and focus on the primary cost drivers that affect

total cost Helps to ensure the accuracy and reliability of the cost estimate Makes it easier to control costs within the organization

Examples: The labor cost associated with assembling a HMMWV at a the factory would

be driven by the quantity of vehicles produced Energy consumption at the PX is driven by the square footage of the

building and the operating hours The cost of printing budget documents for the Office of Management and

Budget is driven by the number of pages in each set and the number of sets needed

Cost DriversOrganizations perform work activities to

deliver products/services to a stakeholder

Types of Analyses Used in Army Decision-Making

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EA Economic Analysis

AoA Analysis of Alternatives

BCA Business

Case Analysis

CBA Cost Benefit

Analysis

Comparative Analyses Supporting Resource Informed Decision

AoA is an OSD MDAP required analysis in support of acquisition requirement decision at early program concept phase MS-A with an update at MS-B decision.

AoA is a formal and elaborate study that in addition to the program life cycle, often includes an operational model done by TRADOC for the Army ASARC and OSD DAB decisions.

EA is an OSD MAIS required analysis in support of investment decision at early IT/ERP program concept phase MS-A with an update at MS-B decision.

EA is also required by the Army CoE in support of Military construction decision.

CBA is an Army required analysis for all new and existing initiatives at resource decision forums with cost of $10M or more.

CBA for Army HQ decision is developed by the initiative advocate and reviewed by the CBA-RB . AMC and TRADOC also have similar process for their internal resource decisions.

BCA is an OSD MDAP required analysis at post production phase in support of Performance Based Logistics (PBL) Contractor Logistic Support (CLS) vs. organic O&S decision. Risk analysis is an essential component of BCA.

BCA term is often synonymous with CBA for non-PBL analysis.

(MDAP) Major Defense Acquisition Programs

(MAIS) Major Automated Information System programs

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Break-Even Point:• Used when a given alternative has a significant investment

cost but is expected to experience cost reduction in future years

Break-Even Point

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This is also where (in current dollars):savings = investment

Cost Reduction = Upfront Investment

Summary of Break-Even Point:- It’s the year where the savings become positive.- Using inflation indices, constant dollars are converted into current dollars.- Savings are the difference between cumulative costs.

Example - Break-Even Point

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Internal Rate of Return (IRR)• The annualized effective compounded return rate • Rate where the present value of cash inflows is equal to the present value of cash outflows• IRR = (FV/PV)1/N -1

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Net Present Value (NPV):• The difference between the present value of cash inflows

and the present value of cash outflows– Used to analyze the profitability of an investment

• This works only if values, costs (outflows), and benefits (inflows) are quantified into monetary terms

Net Present Value

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Net Present Value Formula

Net Present Value (NPV):• The amount of dollars that would have to be invested

during the base year at the assumed discount (interest) rate to cover the costs, match the revenues, or match the savings at a specific point in the future

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NPV = PV (benefits) – PV (costs)

Cost Estimating in EA

Must consider the “Economic Life”• Period of time over which the benefits to be

gained from a project may reasonably be expected to accrue. Benefits are limited by the equipment or facility’s physical and technological life

• Measured against a stipulated level of threat, or represent a period during which a given mission or function is required or can be supported

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Total Life Cycle Cost (LCC)• The sum of all costs required to research, develop, test, procure, field, operate, sustain, and dispose a system • A planning number that often differs from the sum of budgeted amounts allocated towards or in support of a particular system

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Investment Multiples/Ratios• Ratios compare the profits or savings of an investment cost to illustrate the relativity of cost and savings• S/IR = OPERATING COST SAVINGS

COST OF INVESTMENT• If S/IR > 1, then positive investment

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Business Cases Analysis (BCA): Key Questions

Is the proposed solution:

1. Financially Viable (Make Economic Sense)

2. Optimal (Best Value or Increased

Effectiveness)

3. Feasible (Assessing Constraints)

4. Implementable (Risks & 2nd/3rd Order Effects)

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Within the Department of the Army, one major process which incorporates cost analysis is Cost Benefit Analysis (CBA)

Cost Benefit Analysis (CBA)

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Cost-Benefit Analysis:• Is a structured methodology used to identify alternative

solutions to a problem, determine the costs and benefits of each alternative, define the appropriate decision criteria, and select the best alternative

• Produces a strong value proposition – a clear statement that the benefits outweigh the costs and risks.

• In Basic Terms:1. Define a problem or opportunity2. Identify alternatives3. Determine their costs and benefits4. Evaluate and select the best alternative

What is a CBA?

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Purpose:• Supplement (but not replace) professional experience,

subject matter expertise, and military judgment with rigorous analytical techniques

• Make best possible use of constrained resources• When making resource decisions:

– Ensure that all decisions are resource-informed– Treat cost as a consideration from the outset, not as an

afterthought– Understand how much benefit will be derived– Identify billpayers– Consider second- and third-order effects

Why Do We Need CBAs?

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• In any organization, “culture” is the beliefs and principles that guide the behavior of the people in that organization.

– Example: The Army’s military culture is based on mission accomplishment, selfless service, valor, and dedication. These concepts establish the foundation for how Soldiers and Civilians go about their duties.

• In a cost culture:– Cost is an integral part of every decision– Soldiers and Civilians strive to find better and more cost effective ways to operate the

Army enterprise– Leaders at all levels engage in cost control and management activities, which are

supported by talented cost staffs

CBA and the “Cost Culture”

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CBA is part of a high-priority initiative to inculcatea cost culture throughout the Army.

BENEFITS The total of

quantifiable and non-quantifiable benefits

Quantifiable benefits Cost Savings Cost Avoidances

Non-Quantifiable benefits Greater capability Faster availability Better quality Improved morale Other?

CBA – Using analysis to make the case for a project or proposal:

Weighing the total expected costs against the total expected benefitsover the near, far, and lifecycle timeframes from an Army enterprise perspective

BENEFITS MUST BALANCE OR OUTWEIGH COSTS

Cost Benefit Analysis

COSTS Quantifiable costs

Direct Indirect Initial/Start up Sustainment Procurement

Non-Quantifiable costs Life/Safety/Health Perception/Image Opportunity Risk/Uncertainty Political 8. Report Results and Recommendations

7. Compare Alternatives

6. Define Alternative Selection Criteria

5. Identify Quantifiable and Non- Quantifiable Benefits

4. Develop Cost Estimate for each Alternative

3. Define Alternatives

2. Define the Scope; Formulate Facts and Assumptions

1. Define the Problem/Opportunity

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CBA is NOT a Linear Process

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Objective

Assumptions

Alternatives

SelectionCriteria

CompareAlternatives

Recommendation

Cost EstimatesBenefits

Estimate

Sensitivity Analysis

• At any step in the process, the team’s findings and analysis might make it necessary to revisit previous steps

• Significant findings might require asking the decision maker for revised guidance

Normalization and Inflation

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• Adjusting for inflation is a specific form of normalization, an adjustment intended to make a given data set consistent and comparable with other data sets

• A frequent use of simple normalization is to adjust based on quantities. For example:– In a manufacturing process, COA 1 produces 17,000 widgets per

year at a total cost of $33,765 and COA 2 produces 14,500 widgets at a total cost of $28,725. It’s difficult to evaluate these COAs unless we normalize by computing a unit cost, which shows us that COA 2, with a unit cost of $1.95 per widget, is preferable to COA 1, which has a unit cost of $1.99.

Normalization and Inflation

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What is Inflation?

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Of all the topics discussed in cost analysis, none will be encountered more frequently than inflation

Definition• A rise in the general level of prices• Measure of change in the dollars’ purchasing power• In other words:

• A given dollar amount will have less buying power next year than it does this year

• To maintain consistent buying power, we must adjust this year’s dollars with the inflation factor from year to year

Common methods for normalization:• Discounting• Constant (Base) Year

• Basic calculations:– (Constant Dollars) * (Inflation Factor) = Current (Dollars)– Inflation is compounded from year to year (i.e., multiplied, not

added).• Example: A loaf of bread in 1950 cost $0.25. Today, in 2012, it costs

$3.00.

Inflation Calculation and Examples

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• Data: We’ve calculated the annual cost for a given COA in FY12 constant dollars:– Civilian personnel: $145,000– Contract support: $100,000 (paid by OMA appropriation)

• Applicable inflation factors:– Civilian personnel: 2% per year– OMA appropriation: 3% per year

• Calculation for the first three years of the life-cycle:

Example—Current Dollar Calculation

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Cost Element

Const. Dollar Cost

Infl. Factor

Current- Dollar Calculation Current-Dollar Cost

FY12 FY13 FY14 FY12 FY13 FY14

Civ per 145,000 2% 145,000 145,000 * 1.02

145 * 1.02^2

145,000 147,900 150,858

Contract 100,000 3% 100,000 100,000 * 1.03

100,000 * 1.02^2

100,000 103,000

Total cost

245,000 245,000 250,900 256,948

Risk Assessment

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The goal of risk assessment is to answer questions like:• What risks may occur? • What is the likelihood that risks will occur? • Are the source of these risks internal or external? • What causes these risks? • What are the consequences if the risks go unresolved?

– What assets, operations, activities, functions, etc. will be affected as a result?

• How much risk is tolerable? • What should be done to anticipate and limit risks?

Risk Assessment and Mitigation

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Always measure the risk by the potential adverse impacts on alternatives.

Business/Programmatic Risk:• Affects the budget and viability of a programOperational Risk:• Affects the ability to perform a missionProcess Risk:• Associated with failing to meet standards and performance benchmarks in a

newly established processTechnical Risk:• Associated with failing to develop or implement technologySchedule Risk:• Associated with allocating time to perform and manage tasksOrganizational Risk:• Associated with management changes

Types of Risks

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• Methods of measuring and/or addressing risk include, but are not limited to:

– Effective Mean– Cost of Risk Mitigation

Ways to Measure/Address Risk

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• The effective mean, or expected value, of a measurable quantity is the sum of all possible outcomes multiplied by their corresponding probabilities

• Example: if the cost of a new ground combat vehicle is judged to be $1.4M with 50% probability, $2M with 25% probability, and $1.2M with 25% probability, then the effective mean (expected cost) is $1.4M x 0.5 + $2M x 0.25 + $1.2M x 0.25 = $1.5M.

• Example: if inter-theater transit time for a sustainment brigade is projected to be 5 days with 90% probability and 4 days with 10% probability, then the expected transit time is 5 x 0.9 + 4 x 0.1 = 4.9 days.

Effective Mean (Expected Value)

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Cost of Risk Mitigation

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If a cost can be associated with reducing risk, then risk can be measured by that monetary value.

Example: If for $22K extra, the risk of a schedule over-run can be reduced from 15% to 3%, then $22K can be a measure for the difference in risk.

• Use authoritative data sources• Ensure that cost estimates support “apples-to-apples”

comparison among COAs• Ensure the cost estimate is well-documented,

comprehensive, accurate, and credible• Constant vs. current dollars

– Use constant (un-inflated) dollars for even comparison for COAs in CBAs

– Convert estimate to current (inflated) dollars to determine POM/budget resourcing requirements

Cost Estimating Principles and Rules

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Cost Estimating Methods

Available methods:• Analogy

• Parametric

• Engineering

• Actual Cost

• Expert Opinion

• Learning Curves

Available Cost Estimating Methods

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Most CBAs utilize all cost estimating methods

Cost Estimating Methods

Parametric

Analogy

Actual Costs

Engineering

GROSS ESTIMATES DETAILED ESTIMATES

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The use of each method is based on the information available to support it.

Figure 1: A summary of the usual application of each technique.

Analogy Method

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• Estimates the cost, based on historical data, of an analogous system or subsystem

• Utilizes a current fielded system that is similarly designed to the proposed system

• Adjusts historical cost of the current system to account for differences– Adjustments should be made through parameters/scaling

factors based on quantitative data These adjustments should show validity of comparison

When is it used?• When an analogous case (that can be applied to a

subsystem or component level) exists

Attribute Old System New SystemEngine: F-100 F-200Thrust: 12,000 lbs 16,000 lbsCost: $5.2M ?

Q: What is the unit cost of the F-200?

A: $5.2M * (16,000/12,000) = $6.9M

Warning 2: An adjusted analogy is, by definition, estimating outside the

range of the data.

Warning 1: An adjusted analogy is

like a regression, but the slope is just a

guess.

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Analogy Method Example

Parametric Method

• Uses regression or other statistical methods to develop a cost estimating relationship based on observed patterns of how specific parameters influence total cost

• Utilizes:• High-level ‘Work Breakdown Structure’ (top down approach)• A database from elements of one or more systems

When is it used?• Historical data is available but not detailed• In earlier stages of the system or project life cycle

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Parametric Method Example

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Cost of Gross Curb Cubic Ft Net Vehicle First Unit Weight Weight Shipping Horsepower M274 $ 9,585 1,770 970 81.6 12.5M561 50,002 8,363 5,363 732.3 93M656 93,262 24,785 14,785 1,227 183 M520 147,889 36,590 10,500 2,368 176

High Mobility Wheeled Vehicles Database

Is ‘Cubic Ft Shipping’ a good predictor of cost?

Parametric Method Example (Cont’d)

0

50000

100000

150000

200000

0 500 1000 1500 2000 2500

Cost

of F

irst U

nit (

$K)

Cubic Feet of Shipping

Cost of First Unit vs. Shipping Capacity

We can estimate the cost of any vehicle given the shipping capacity using the above equation.

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Cost of First Unit = 60.992 * (Cubic Shipping Feet) + 7,957.2

Engineering Method

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• Breaks down the system of interest into lower level components, each of which is estimated separately– Work Breakdown Structure

• Uses algebraic equations (bottom up approach)– Most detailed of all techniques

• Requires extensive knowledge of a system’s characteristics and the respective detailed data

• Is expensive and time consumingWhen is it used?• All potential costs can be assumed or estimated

Types of Army data sources (AMCOS Lite, MILCON, SRM, historical ,execution, travel, etc.)

• What the WBS does:– Ensures that all component elements are identified so that all costs are

counted only once– Provides a systematic, standardized way to collect data

• Decompose to as many levels as needed• Example: The airplane cockpit can be decomposed into its

subelements:– Instrument panel

• Primary flight instruments– Directional gyro– Turn and bank indicator– Altimeter– Airspeed indicator

• Avionics controls– Communications– Navigation– Radar

Developing the WBS

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– Flight control systems• Rudder pedals• Steering yoke• Trim tab controls

– Seats• Seat and shoulder belts• Cushions• Head rest

… and so on

A well-decomposed process flowchart that defines/describesthe COA is a useful tool in developing the WBS

WBS – Another Example

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Actual Cost Method

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• If historical costs from experience or trends from prototypes, engineering development models, and early production items are available, they can be used to cost current goods or services

• Extracts costs that were actually incurred on same system during an earlier period– Obtaining access to these actual costs may be difficult

When is it used?• The actual data from the same system is present

Actual Cost Method Example

a. The development process is nearing completionb. The materials have all been procured at a cost of

$20Mc. The labor cost to date is $30Md. According to earned value cost performance

reports (CPRs), the estimated cost at completion for the remainder of the labor is another $20M

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Cost = $20M + $30M + $20M = $70M

Expert Opinion Method

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• Obtains opinions from experienced individuals or a group– Documents the source of opinions– Lists attributes of the sources

When is it used?• When availability of data is limited.

Delphi Technique1. Query expert opinion from group

2. Seek expert opinion from each group, and then summarize results to send in reports

3. Gather another opinion and summarize those results

4. Continue process until experts reach a consensus

1. You hold interviews to explain the Stakeholders’ needs, sizing level, and development process for your new system

2. Each member of the group submits his/her opinion of the final cost

3. If all expert opinions converge to, or hover around the same figure, that may be taken as a good cost estimate

Expert Opinion Method Example

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Scenario: Three software engineers are recognized experts in ERP software

development

Forecasting: What is Forecasting?

• Process of predicting a future event

• Underlying basis of all business decisions

• Production• Inventory• Personnel• Facilities

??

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Personnel Costing

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Personnel Costing

• Labor is expensive and typically accounts for the majority of costs incurred

• Example: when you get your car repaired, labor typically accounts for 70-85% of the bill

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AMCOS

• AMCOS is the principal tool cost analysts use for labor costing and it can be found at:

https://www.osmisweb.army.mil/amcos/app/home.aspx• Costs are shown for military, government

civilian, and private sector civilian workers• Costs are most detailed for military, and the least

detailed for private sector civilians

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AMCOS

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AMCOS

63AMCOS ApplicationsAMCOS lite

GFEBS Payroll vs. Labor

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Optimization

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What is optimization?

• Optimization is about achieving the maximum or minimum possible result

• Example: If you have 20ft of fence to make a rectangular garden, what is the maximum sized garden you can make? The answer is a square with each length measuring 5ft.

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• U.S. Army Central Command has secured $198M for the procurement of two different models of the “HIMARS 2” multiple rocket launcher—class X and class Y—for deployment to Afghanistan.

• The class Y HIMARS 2 costs $9M each and weighs 27,000 pounds.

• The class X HIMARS 2 costs $11M and weighs 12,000 pounds.

• After procurement, all the HIMARS 2 will be transported to Afghanistan by a fleet of C-130 Hercules aircraft, each with a total maximum payload of 405,000 pounds.

Example: Finding Optimal Solutions

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1. How do you maximize the total number of HIMARS procured?

2. If you buy only Class X, you can afford 18.3. If you buy only Class Y, you can carry 15.4. So is “buy 18 Class X HIMARS” the optimal

solution?

Example: Finding Optimal Solutions

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Example: Finding Optimal Solutions

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COA 1 (Status Quo)

COA 2

COA 3

COA 4

• You can procure 9 Class X and 11 Class Y HIMARS, for a total of 20.

• Moral of the exercise: analysis is sometimes necessary to determine the optimal solution.

Example: Finding Optimal Solutions

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Statistical Analysis

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Statistical Analysis

a m bMeanTime

Beta distribution

a m bMeanTime

3σ 3σ

Area under curve between a and b is 99.74%

Normal distribution

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Statistic Analysis Applications

• Statistics is the study of the collection, organization, analysis, interpretation and presentation of data

• One application of statistics is the U.S. Census. It seeks to understand some details (such as income, gender, marital status) of people living in the country

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Statistical Analysis Standard Terms

• Probability: likelihood of an event occurring (expressed as a value between 0 and 1, e.g. 0.63)

• Average/mean: the sum of a list of numbers divided by the size (amount of numbers) of the list

• Mode: the most frequent appearing or most likely to be drawn quantity

• Variance: (1/N)*∑(xi-average)2

• Standard deviation: square root of variance

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Statistical Analysis Example

• A data set consists of the values 6.5, 6.5, 0.2, 4.0

• The mean is (6.5+6.5+0.2+4.0)/4=4.3• The mode is 6.5• The variance is (1/4)*((4.3-6.5)2+ (4.3-6.5)2+

(4.3-0.2)2+ (4.3-4.0)2)=6.6• The standard deviation is sqrt (6.6)=2.6

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Understanding likelihood of occurrence

• How likely an event is to occur is expressed in probability– Example: if you roll a fair die, you have a 1/6 chance of

getting a particular number since the die is 6-sided• In the case of dice, there are 6 possible outcomes (which

is finite). Sometimes there may be infinite outcomes • What is the likelihood of leaving work at exactly 5pm?

(not being even one billionth of a second over or under)• For cases like this in which there are infinite outcomes

(i.e. you may leave one millisecond over, two milliseconds over, 5 microseconds under, etc.) you need to use probability densities

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Quantifying Cost Risk

• Statistics can be used to quantify risk associated with costs

• We may ask, what are the odds of the costs being significantly under or above the target?

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Cost Risk and Schedule Example

• Example: Let’s say the cost to construct a building is expected to be approximately $3,000,000 if completed on time and every month delay in completion adds $23,000 to the cost, and every month the building is completed in advance saves $23,000.

• There is a 20% chance the building is completed on time, a 20% chance of being one month late, a 20% chance being two months late, a 20% chance being one month early, and a 20% chance being two months early.

• What is the likelihood of paying no more than $2,977,000 for the building?

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Solution to Example

• $2,977,000 is the amount paid if the building is one month early. Thus, if we seek to pay no more than this, we must finish the building one month ahead of schedule (at the latest). In other words, we can finish one or two months early.

• There is a 20% chance of being one month ahead of schedule, and another 20% chance of being two months ahead of schedule, so the answer is 20%+20%=40%

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The “normal/Gaussian/bell-curve” distribution

• A probability density function shows the likelihood of an event occurring.

• The height of the curve corresponds to the likelihood of an event occurring.

• Perhaps the most commonly used probability distribution is the normal distribution.

• Given two points on the x-axis, the area under the curve bounded by these points is equal to the probability that a value within those bounds will occur

• The average and mode are given by the x-coordinate corresponding to the curve’s peak.

Probability of meeting the schedule is 0.8078

Normal distribution:Mean = 69 weeks;σ = 3.45 weeks

Probability of exceeding 72 weeks is 0.1922

Project duration (weeks)69 72

• Consider the normal curve below:– The x-axis shows project duration in weeks. – The peak of the curve occurs at week 69. Week 69 is also the average project duration (which is

intuitive due to the symmetry of the curve). – The purple shaded area represents the probability of having project duration of at least 72 weeks.– The blue shaded area represent the probability of having a project duration less than 72 weeks.

• Probability distributions, especially probability densities, are often used to quantify risk in cost estimating and in other fields

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Variances

• Statistically, how far a set of numbers is spread out or distributed

• In the context of budgeting or cost estimation, a variance is the difference between an actual and an expected (budgeted) amount.

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Variances

• Further analysis decomposes (breaks down) the variance analysis into progressively smaller components answers: “How much were we off?”

• Examination of variance into progressively more-detailed levels of analysis answers: “Where and why were we off?”

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Variances Basic Concepts

• Static-Budget Variance (Level 0): the difference between the actual result and the corresponding static budget amount

• Favorable Variance (F): has the effect of increasing operating income relative to the budget amount

• Unfavorable Variance (U): has the effect of decreasing operating income relative to the budget amount

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Variance Analysis

• VAR (X) = E [(X - µ)2]• Continuous random variable

• Discrete random variable

• Normal distribution

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Tools

Available Tools and Models for Cost Data

Tool/Model URL PurposeFORCES Cost Models https://www.osmisweb.army.mil/forces/login.aspx Suite of models that provides quick

and reasonable unit cost estimates to a wide variety of users

Army Military-Civilian Cost System (AMCOS)

https://www.osmisweb.army.mil/amcos/app/home.aspx

Personnel costs for military, civilian, and/or contractor

ASA(FM&C) Website http://asafm.army.mil/Documents/OfficeDocuments/CostEconomics/rates/indices.xls

Inflation indices

Capabilities Knowledge Base

http://asafm.army.mil/Documents/officedocuments/costeconomics/guidances/ckb-ui.pdfhttp://asafm.army.mil/offices/CE/Ckb.aspx?OfficeCode=1400

Research, development, and acquisition costing for major weapon/material systems

Operating and Support Management

Information System (OSMIS)

https://www.osmisweb.army.mil/osmisrdb/login.aspx

Operating and support information for major weapon/material systems

Some of the websites listed here require user accounts. In most cases, anyone with a dot mil address can obtain an account. You are encouraged to scan these sites and request an account to any site that you think will be useful to you. This will save time when you need to use any sites to support a CBA or other

projects.

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Access links through the “Resources” tab in the CBA Portal at:https://cpp.army.mil

Conclusion

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Overhead Variances

• Overhead is the most difficult cost to manage, and is the least understood

• Overhead variances involve taking differences between equations as the analysis moves back and forth between actual results and budgeted amounts