Targeting Affordability and Controlling Cost Growth through Should-Cost Analysis May, 2012. Anthony A DeMarco President, PRICE Systems, L.L.C. 17000 Commerce Parkway – Suite A Mt. Laurel, NJ 08054 856.608.7214 [email protected]. - PowerPoint PPT Presentation
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Mr. DeMarco is a recognized expert and frequent speaker on predictive cost modeling for optimizing planning, budgeting, and cost management. During his 30 year career he has contributed over 25 papers on cost estimating, analysis and management and is cited on two U.S. patents for cost estimating techniques.
Honors: ISPA Freiman Award, 1997Member, NASA IMCE Task Force 2001NDIA Delaware Valley Chapter President, 2009-2011
Secretary Carter MemorandumOn September 14th 2010 The Honorable Ashton B. Carter; Under Secretary of Defense for Acquisition, Technology and Logistics, released a memorandum addressed to the acquisition professionals of the Department of Defense. The primary thrust of the memorandum was the current need for greater efficiency and productivity in defense spending.
Secretary Carter provided guidance organized into five initiatives 1:
– Target Affordability and Control Cost Growth
– Incentivize Productivity and Innovation in Industry
– Promote Real Competition
– Improve Tradecraft in Services Acquisition
– Reduce Non-Productive Processes and Bureaucracy.
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Notes: 1 - Memorandum for Acquisition Professionals: SUBJECT: Better Buying Power for Obtaining Greater Efficiency and Productivity in Defense Spending (Washington, D.C Sep 14 2010).2 - Memorandum for Secretaries of the Military Departments / Directors of the Defense Agencies: SUBJECT: Implementation Directive for Better Buying Power – Obtaining Greater Efficiency and Productivity in Defense Spending (Washington, D.C Nov 3 2010).
Implementation of Will-Cost and Should-Cost ManagementApril 22, 2011 Memo
Program Managers will develop, own, track, and report against Should-Cost estimates. In doing so, they should use all relevant resources within the Department to facilitate the development of program Should-Cost estimates
Service and Component Acquisition Executives should develop incentive plans for their Program Managers to reinforce and reward commitment to the Will-Cost and Should-Cost Management process. An essential ingredient of Should-Cost management is the provision of incentives for both of the parties to program execution: government managers, who seek more value for the war-fighter and taxpayer; and industry managers, who develop, build and sustain our systems and provide needed services.
Should-Cost estimates can be developed in any of three ways or in a combination.
1. perform a bottoms-up estimate
2. identify reductions from "Will-Cost" estimate
3. use competitive contracting and contract negotiations
Program Managers and Suppliers are challenged to identify efficiencies and manage affordability using Will Cost and Should Cost analysis
Agile “system” models that simulate all program phases are necessary to rapidly analyze data, determine Should Costs, and identify efficiencies that drive savings
There are many examples of success and reusable artifacts from these successes
Common among the successes are proven
steps to successfully target affordability and control cost growth through Should-Cost analysis