A Look Inside
a High Performing
Cost Analysis Organization
2nd Annual ICEAA Canada Workshop
22-23 February 2016
Rick Collins
CEO, Technomics, Inc.
[email protected]
571-366-1402 (Office)
571-218-0411 (Mobile)
Outline
• Some Critical Context
• Distinguishing Features
• Potential Capability Maturity Model
• Closing Food for Thought
2
You Can’t Manage What You Don’t Understand
Credible Cost Estimates
Realistic Budgets
Executable Contracts/Projects
Must avoid
starting projects
that can’t be
finished
Improved Acquisition
Outcomes
Decision-makers
demand & rely on
advice from high
performing cost
organizations
The right cost estimating capability facilitates
authoritative decision-maker knowledge that enables informed decision making
3
The Big Picture
Techniques/Tools
People
Credible Cost
Analysis
Data
Processes
Is one of these ingredients most important?
4
Distinguishing Features – People (1 of 2)
1.
Staff willing & able to think
2.
Staff willing & able to think independently
3.
Staff who ask the right questions
4.
Staff willing & able to convey & defend ‘bad’ news
5.
Staff who can anticipate the next question
6.
Staff who recognize that there is generally more than one way to solve a problem &
make the time to do so
7.
Staff who won’t rest on their or others’ laurels
8.
Staff willing & able to perform cost research leading to improved data and
techniques/tools
9.
Staff who can see the big picture and will proactively act on that perspective
10. Staff who understand that they have unique knowledge and value that extends beyond
cost and will proactively act on that knowledge
“A fool with a tool is still a fool.”
5
Distinguishing Features – People (2 of 2)
1.
Leaders create the right culture to attract, develop, empower, reward and retain talent
that exhibits the aforementioned behaviors
2.
Leaders understand continual investment in data, techniques & tools is essential to
analytical credibility
3.
Leaders understand the manner in which results are presented is more important than
what’s presented
4.
Leaders understand the ‘right’ analysis at the right time is invaluable; great analysis at
the wrong time is useless
5.
Leaders recognize certifications are not a substitute for on-the-job experience
practicing the science and art of cost analysis
6.
Leaders recognize importance of rigorous (though not onerous) quality control
processes
7.
Leaders ensure their bosses understand organizational value well enough to enable
organizational health via marketing, resources, etc.
Leaders orchestrate the optimal investment in & deployment of their assets
6
Distinguishing Features - Processes
Cost Estimating Process
Compile
Programmatic
and Technical
Baseline
Develop
Estimating
Plan
Define
Estimating
Structure
Collect
Documentation
Compile
historical
data
Develop
Cost
Estimate
Develop
Estimating
Methods
Conduct
Sensitivity
Analysis
Timephase
the estimate
Develop
Ground Rules
&
Assumptions,
Estimate
Boundaries
Cost Assessment Process
Determine
Level of
Completeness
Determine
Level of
Accuracy
Determine
Level of
Credibility
Document
Findings
Conduct
Cost Risk
Analysis
Analyze and
reconcile
results
Review
Documentation
Document
and Defend
Estimate
Other Processes
•
•
•
•
•
•
•
Data collection & normalization
Cost estimating relationship development
MS Excel cost model development
Risk and uncertainty analysis
Quality control
…
…
Standard processes = repeatability, transparency, accuracy & credibility
7
Distinguishing Features - Data
• Authoritative data is readily accessible, well organized & relied
upon
Cost Data
Quantity, schedule &
other contextual info
Programmatic
Data
Technical Data
Raw and normalized actuals
Physical and performance parameters
Foundation for
Credible Analysis
• Authoritative data is maintained to ensure recency, completeness
& efficiency
High performing cost orgs do what it takes to get the right data
8
Distinguishing Features – Techniques/Tools
• Analytical and visualization methods that enable analytical
results ensuing actionable insights
Automated compilation of CERs
‘Cost’ Models
– In-house &
commercial
Cost
Estimating
Relationships
(CERs)
Data
Visualization
Tools
WBS/cost element-specific algorithms
Data graphics that enable more effective
analysis & storytelling
Foundation for
Credible Analysis
• Methods are maintained/enhanced/developed to ensure
relevance
High performing cost orgs invest in developing & acquiring the right enablers
9
Capability Maturity Model
Enabled Outcomes
Delivery
On Time/At Cost
Maturing Capability
Executable
Contracts
Realistic
Budgets
Capability Level
Attribute
Entry
Basic

Technical Baselines **
Quality of Data **

Estimating Techniques **

Automated Tools

Repeatable Processes
Mature

** Definitions of each capability level follow
Cost Analysis Support Continuum
Planning
Evaluation
Monitoring
Time
High performing orgs routinely look in the mirror, learn and evolve
10
Maturity Levels for
Realistic Technical Baselines
• Realistic technical baselines provide the necessary inputs for developing a
credible cost estimate. Inaccurate and/or missing key technical data
typically results in cost estimates based on optimistic assumptions, aka good
intentions.
Entry – Technical data elements are collected on ad-hoc basis with no
standardization across projects.
Basic – Technical data elements are collected on an ad-hoc basis with standardization
across projects.
Mature – Technical data elements are collected and reported in a standard process
across programs/projects
High performing cost orgs enable technical baseline realism
11
Maturity Levels for
Quality of Data
• High quality historical cost, technical and programmatic data is required to
develop credible estimates. Quality of data includes many variables such as:
granularity (level of detail), volume (number of related projects), relevance
(applicability to future projects) and validity/accessibility (each us
dependent on having a formal data collection process and system).
Entry – Limited high-level data exist for primarily foreign nation projects. Limited
number of relevant Canadian experiences available. The number of actual projects is
few and not completely analogous for application. Ad-hoc data collection techniques
and storage methods exist.
Basic – More detailed data exist. Small number of Canadian experiences available to
analyze and represent some diversity of ship types. Application of data still requires
significant extrapolation. Standardized data storage and sharing processes have
been defined to support info access and sharing.
Mature – Detailed data exists for many foreign and multiple Canadian projects that
represent a healthy population of analogous ship types. A data collection process
and system exists with well-defined data collection processes, requirements,
validation techniques and web-based sharing.
High performing cost orgs collect the right data
12
Maturity Levels for
Estimating Techniques
• Valid analytical estimating techniques that accurately represent the data
and potential explanatory variables facilitate the credibility of estimates.
They also provide the foundation for developing homegrown estimating
tools or populating/calibrating commercial estimating tools.
Entry – Existing estimating techniques are used as-is, despite weaknesses that
warrant improvement.
Basic – Cost research performed on as-needed basis produces new or updates
existing defensible estimating techniques. Standard estimating techniques for some
significant elements and phases of cost are available to cost analysts.
Mature – Cost research performed on a routine basis produces new or updates
existing defensible estimating techniques. Standard estimating techniques for all
significant elements and phases of cost are available to cost analysts
High performing cost orgs exploit the right data
13
Closing Food for Thought
• High performing cost organizations invest to achieve the right balance
of the four ingredients
Techniques/Tools
People
Credible Cost
Analysis
Data
Processes
• High performing cost organizations understand where/how they are
delivering value to the enterprise and leverage this performance
Enabled Outcomes
information to their advantage
Delivery
On Time/At Cost
Maturing Capability
Executable
Contracts
Realistic
Budgets
Capability Level
Attribute
Entry
Basic
Quality of Data **


Estimating Techniques **

Automated Tools
Repeatable Processes
Mature

Technical Baselines **

** Definitions of each capability level follow
Cost Analysis Support Continuum
Planning
Evaluation
Monitoring
14