delivering cost data to the mod to support business cases

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© Copyright QinetiQ Limited 2009

Delivering Cost Data to the MoD to Support Business Cases

Paul Duvall Deputy Team Manager HVR Practice – Through Life Cost Modelling

Association of Cost Engineers

3 Nov 09

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Contents slide

1 Process and Requirements

2 Modelling Examples

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1Process and Requirements

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Generic Process?

Whole Life Cost Model(Deterministic) £

MDAL(Master Document Assumptions List)

• SME Cost Assessments• Supplier Cost Data• Equipment Reliability Data• DLOD Base Assumption

Risk Register

• SME Risk Assessments

Probabilistic Risk Model

Whole Life Cost Model (Probabilistic)

£ ££ £

CapturesUncertainty

CapturesRisk

Provides 10, 50, 90%Confidence Figures

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Risk Modelling Terminology

UncertaintyCurrent Potential Variation in project cost or duration which will not be “firm” until contract sign-up= 3pt Range

RiskEvent which may or may not happenwhich would add to assumed project cost or duration= Probability * Impact

Opportunity Event which would reduce the assumed project cost or duration= Probability * Impact

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Measuring Confidence/Optimism Bias

50%

90%

Whole Life Cost

Pro

ba

bili

ty o

f O

cc

urr

en

ce

10%

Uncertainty

--Uncertainty & Post Mitigated

Risks

--Uncertainty & Pre Mitigated Risks

-

Uncertainty & Post Mitigation Risks +

Mitigation Cost-

SPE

50%

90%

Whole Life Cost

Pro

ba

bili

ty o

f O

cc

urr

en

ce

10%

Uncertainty

--Uncertainty & Post Mitigated

Risks

Uncertainty & Post Mitigated

Risks

--Uncertainty & Pre Mitigated Risks

Uncertainty & Pre Mitigated Risks

-


Mitigation Cost


Mitigation Cost-

SPESPE

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CMTL

Allocation of Cost

• Input

− Defence Lines of Development

− TEPIDOIL (I)

− Training, Equipment, Personnel, Infrastructure, (Concepts &) Doctrine, Organisation, Information, Logistics………………… (Interoperability).

− Cost Resource Breakdown Structure (CRBS)

− PBS/WBS/BOM etc

• Output

− Budget Holder

− EPP/ESP

− RDEL/CDEL

− TLF

− Procurement, Upkeep, Update, Upgrade, Capital Spares, Fuels, Other Costs

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Current Issues

Allocation of Uncertainty

• Use of Global Uncertainty Factors

− Impact:

− uncertainty applied across ALL elements of model

− Does not reflect increasing uncertainty as estimate extends into the future

• Identification of Uncertainty

− Annualised or Totals?

Allocation of Risk

− Foreign Exchange Risk

− Correlation?

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Global Uncertainty

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

resultSingle

resultTwenty

resultHundred

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2Modelling Examples

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Through Life Costing Capability (Case Study)

Concept Assessment

IG MG

Demonstration Manufacture In-Service Disposal

Costing RequirementsBOI StudiesCost of OwnershipTrade StudiesOptions AnalysisAffordability AnalysisRisk Assessment

Costing RequirementsBOI StudiesCost of OwnershipTrade StudiesOptions AnalysisAffordability AnalysisRisk Assessment

Costing RequirementsBOI StudiesCost of OwnershipTrade StudiesOptions AnalysisStrategiesRisk Assessment

Costing RequirementsBOI StudiesCost of OwnershipTrade StudiesOptions AnalysisStrategiesRisk Assessment

Cost RequirementEarned value MeasurementWhole Life CostsCost of OwnershipTrade StudiesSupport Strategies

Cost RequirementEarned value MeasurementWhole Life CostsCost of OwnershipTrade StudiesSupport Strategies

Costing Requirement Earned Value MeasurementCost of OwnershipUpkeep Strategies

Costing Requirement Earned Value MeasurementCost of OwnershipUpkeep Strategies

Cost Forecasting Tools

OSCAMPortfolio

Cost Forecasting ToolsFACETOSCAMPortfolio

Bespoke WLF modelsCRBS, DLODS

Cost Forecasting ToolsFACETOSCAM

EVM toolsPortfolio

Bespoke WLF modelsCRBS, DLODS

FACET

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Concept Phase - Exemplar

Exemplar: Assessment of Options for Auxiliary Warship

• Family of Advanced Cost Estimating Tool (FACET) used to generate the acquisition cost for the development and manufacture of 6 ships.

• Using the established performance criteria key Design inputs were identified and agreed.

• Excursions:

− reduced displacement

− smaller helicopter or fewer larger helicopters

− fewer (vertical) replenishment points

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Through Life Costing Capability (Concept)

Programme cost (2009 prices)

£0M £500M £700M £800M £900M £1000M £1100M

Iteration 1

Iteration 2

Iteration 3

Iteration 4

13101220 1400

11661078 1254

1027940 1114

838753 923

£1200M £1300M £1400M

Bu

dg

et

FACET provides the capability of generating iterations against variations in performance and design rapidly

Budget Line clearly indicates the difficulty of procuring 6 Auxiliary warships to meet the original KURs

Budget £1100 m

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Historic Trend Analysis - FACET

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In-Service Phase Exemplar

OSCAM - Operational SupportCost Analysis Model

Can provide detailed analysis of support costs

Can provide rapid cost assessment

Can show effect of running options and allows comparison

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In-Service Cost Option Analysis

Running Options (Exemplar)

• Baseline: aircraft maintenance based on three lines of maintenance

• Excursion: actions previously handled by the intermediate level are split between Govt (Organic) and Contractor Depots

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