War-winning Capabilities…On Time, On Cost Acquisition Cost Acquisition Cost Estimating Update Estimating Update 28 Feb 08 28 Feb 08 Ken Kennedy, AAC/FMC Kristy Golden, AFCAA/FMAE Air Armament Center Air Armament Center DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited. 1
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War-winning Capabilities…On Time, On Cost Acquisition Cost Estimating Update 28 Feb 08 Ken Kennedy, AAC/FMC Kristy Golden, AFCAA/FMAE Air Armament Center.
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War-winning Capabilities…On Time, On Cost
Acquisition Cost Acquisition Cost
Estimating UpdateEstimating Update
28 Feb 0828 Feb 08
Ken Kennedy, AAC/FMC Kristy Golden, AFCAA/FMAE
Air Armament CenterAir Armament Center
DISTRIBUTION STATEMENT A: Approved for public release; distribution is unlimited.1
• GAO-07-406SP Defense Acquisitions Assessments of Selected Weapon Programs– GAO assessed 62 weapon systems with a total
investment of over $950 billion, some two-thirds of the $1.5 trillion DOD plans for weapons acquisition
– “Fully mature technologies were present in 16 % of the systems at development start” - the point at which best practices indicate mature levels should be present.
– Programs that began development with immature technologies (84%) experienced a 32.3 percent cost increase, whereas
– Those that began with mature technologies (16%) increased just 2.6 percent.”
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War-winning Capabilities…On Time, On Cost
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Leadership Concern
• Sue Payton: Jane's Defence [sic] Weekly, 07/17/2007– Reduce pressure on budget by improving methods for
calculating the overall cost of acquisition programme [sic]
– Stop taking contractors' one-off cost estimates at face value
– Develop own methods for calculating the true, long-term cost of a weapon system
– Tendency to highlight the basic price tag of a weapon system and play down the much bigger 'lifecycle cost
– Wait until a preliminary design review has been completed, rather than trying to guess a weapon's price before the final requirements are defined
– Push contractors to build more prototypes … important insight into future development costs
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War-winning Capabilities…On Time, On Cost
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Congressional Reaction
Nunn-McCurdy Breach Thresholds• 2006 Defense Appropriations Act (Public Law No:
109-148)
• Requires Increased emphasis on – Accurate TRL assessments– Quantification of risk and uncertainty – Optimal decisions within trade space constraints– Better cost and schedule forecasts– Budgeting to Independent Cost Estimates
Type Breach Notification CertificationInitial APB 30% 50%Current APB 15% 25%
Growth Over Baseline
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War-winning Capabilities…On Time, On Cost
Root Cause
LowMed-LowMedMed-HighHigh
Cost risk levels
Extremely High
Range of Missile Program Cost Outcomes
TRL Level
AOA Risk Reduction SDD LRIP FRP
1 2 3 4 5 6 7 8 9
Risk is retired as a program progresses and technology matures
LowMed-LowMedMed-HighHighExtremely
High
We are too optimistic about risk/uncertainty
Ris
k/U
ncer
tain
ty
High
High
Med
Med
Low
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War-winning Capabilities…On Time, On Cost
2007/2008 Initiatives
• Better Risk ID and Modeling
• Continued Sufficiency Reviews
• New Source Selection Focus
• More Contract Risk Sharing
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War-winning Capabilities…On Time, On Cost
• Integrate Probability of Consequence Screening (P/CS) “risk cube” and Probability of Program Success (PoPS) assessment into cost estimating process – Existing infrastructure tools– Realistic and consistent approach– Results in a “time now” WBS risk rating
• Use Monte Carlo simulation with WBS correlation to define total program cost – Present decision maker with better picture of
uncertainty based on knowledge today
Better Risk ID and Modeling
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War-winning Capabilities…On Time, On Cost
• Cost “gray beard” review – Reinforce estimating best practices– Verify data sources and methodology– Suggest alternate benchmarks– Request appropriate SME inputs
– Major program milestone decisions -- Independent Cost Estimates (ICE) for delegated programs (required by law); Component Cost Analysis (CCA); AF CAIG service cost position (SCP)
– Headquarters/functional support (analysis, review, etc.)
– Provide Cost Estimators with the tools to succeed
Improve Air Force Cost Estimating
Current Status
• Policy AFD 65-5– The acquiring organization shall build program cost estimates*
• Annually
• Milestone decisions
• Nunn-McCurdy Cost Breaches
• Source Selections
• POM initiatives, disconnects, and offsets – Headquarters shall provide non-advocate cost / risk assessments to decision makers– Collaboratively develop and execute training, data collection/methods and model
development programs – Headquarters shall review cost, economic, or business case analyses to be presented
to SECAF, USECAF, CSAF, VCSAF• Personnel
– Hired 20+ positions• Operating Locations
– Completed beddown agreements at Peterson AFB, Wright-Patterson AFB, Eglin AFB, Hanscom AFB, and LA AFB
– Working Host Tenet Support Agreement at each location• Training and Certification
– Partnered with SCEA and DAU to improve certification program– Developed Training OI for new analysts
* Led by government employees
* SAF/FMC defined standards and procedures
AFCAA OL Mission
Shorten “Kill Chain” (Cost Budget)
• AFCAA-OL will function as the liaison with the Center
• Work collaboratively with the program office estimators
• Non Advocate Cost Assessments (NACAs)
• Independent Cost Estimates (ICEs)
How the AFCAA-OLs will Help
• Collaborative program cost estimates– Build cost models– Cost estimating relationships– Risk analysis– Data / research / methods
• Potential roles– Team lead– Team member– Sufficiency reviewer– Consultant– Researcher– Facilitator between Program Office and DCARC (OSD CAIG)
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War-winning Capabilities…On Time, On Cost
Industry Help
• Don’t over promise capability with unrealistic resources
• Define and quantify uncertainty for your proposed concept
• Provide true risk now versus what it could be in a future year
• Identify the right level of MR to neutralize problems before they overwhelm the program
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War-winning Capabilities…On Time, On Cost
Summary
• Cost estimating community needs to provide more realistic resource projections for Congress and DoD
• Additional AFCAA resources are in place now with more FMC positions coming to help programs
• New initiatives are in work to improve estimate quality, quantify uncertainty, and fund appropriate risk efforts