Systems Life Cycle Cost Considerations Applied to Stability and - - PowerPoint PPT Presentation

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Systems Life Cycle Cost Considerations Applied to Stability and Reconstruction Operations

John V. Farr, Ph.D., P.E. Professor of Engineering Management and Director of the Center for Nation Reconstruction and Capacity Development Department of Systems Engineering United States Military Academy at West Point West Point, NY 10996-1779 Office: (845) 938-5206 Cell: (845) 667-9573 Email: John.Farr@usma.edu or john.vail.farr@gmail.com

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• Introduction
• The Classical Systems

Challenges

• Stability and

Reconstruction

• Life Cycle Considerations
• Summary

Agenda

Slide No. 3 of 30 3/1/12

The mission for the Center for Nation Reconstruction and Capacity Development is to take an interdisciplinary and systems approach in facilitating and focusing research, professional practice, training, and information dissemination in the planning, execution, and assessment of efforts to construct infrastructure, policies, and competencies mainly in support of building partner capacity for communities and nations primarily in developing countries. The Center will have a strong focus on professional practice in support of developing current and future Army leaders through its creation of cultural immersion and research

• pportunities for both cadets and faculty.

Mission Statement

Slide No. 4 of 30 3/1/12

• Energy Security
• Resource Allocation and

Efficiencies

• Operations and Disaster

Resiliency

• Social and Environmental

Sustainability

• Energy Security
• Resource Allocation and

Efficiencies

• Operations and Disaster

Resiliency

• Social and Environmental

Sustainability

• Future Technologies and

Concepts

• Ilities - Sustainability,

Supportability, Affordability, and Adaptability

• Future Technologies and

Concepts

• Ilities - Sustainability,

Supportability, Affordability, and Adaptability

• Nation Reconstruction
• Forward Operating Bases
• Theater Security

Cooperation

• Host Nation Capacity and

Economic Development

• Assessment and Policy
• Reconstruction Training
• Nation Reconstruction
• Forward Operating Bases
• Theater Security

Cooperation

• Host Nation Capacity and

Economic Development

• Assessment and Policy
• Reconstruction Training

Warfighting Installation Operations Future Concepts

Our Research Agenda

Infrastructure and Other Supporting Enablers: People, Policies, and Technology

Conflict Non Conflict Conflict/Non Conflict Methods Processes, and Tools (MPTs)

Advance the state of knowledge in complex socio-technological systems as related to infrastructure in support of nation reconstruction, security cooperation, and

• perational needs

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Our Competencies

Life Cycle Cost Analysis Resource Allocation Assessment Decision Analysis Systems Thinking Modeling and Simulation Infrastructure Assessment Economic Development

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Life Cycle Cost Analysis

Formal definition of life-cycle costing A general method of economic evaluation which takes into account all relevant costs over a given period of time adjusting for differences in the timing and the true value of those costs. What is life-cycle cost? Life-cycle cost (LCC) is the total cost of ownership of a product, structure,

• r system over its useful life.

R&D Investment O&S F-16 Fighter 2% 20% 78% M-2 Bradley 2% 14% 84%

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• Introduction
• The Classical

Systems Challenges

• Stability and

Reconstruction

• Life Cycle

Considerations

• Summary

Agenda

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Cost in the Systems Process

High Ability to Influence LCC (70-75%

• f Cost

Decisions Made) (10%-15%)

72% Life Cycle Cost 28% Life Cycle Cost

Less Ability to Influence LCC (85% of Cost Decisions Made) Little Ability to Influence LCC (90-95%

• f Cost Decisions

Made) (5%-10%) Minimum Ability to Influence LCC (95% of Cost Decisions Made)

Conceptual Exploration Component Advanced Development Systems Integration/ Preliminary Design Systems Demonstration, Test, and Evaluation Production Operations, Support, & Disposal

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• Increased system complexity
• External funding instability
• Loss of “mission urgency” at the end of
• f each major engagement
• Diminished depth of talent in the

government and/or contractor community

• Requirements creep
• The need to satisfy demands from an

increasingly diverse user community

• Inadequate up-front project planning
• Lack of management oversight
• Accountability
• Clear metrics on both the government

and contractor sides

• Exponential growth in, and reliance on,

software

• Complex owner/prime/sub

interdependencies

The Problem

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1969 1955 1969 1970 1953 1954 1946

F-14 UH-1 F-15 SSN 688 AIM-9 KC-135 B-52

1973 1959 1975 1976 1955 1957 1955

2010+ 2004+ 2010+ 2026+ 2025+ 2017+ 2040+

41+ Years 49+ Years 51+ Years 56+ Years 72+ Years 86+ Years 94+ Years

Extended Life Notional Projected Lifetime Development Start Base Model IOC Plan Phase Out (Last Model)

Current Trends in Military Systems

Similar Reality for Enterprise Level IT Systems Many Applications Pre-Date the Internet and the Client-Server Architectural Paradigm

We must start designing like private industry

• Modularity
• Open

source/architecture

• Commercial

standards

• Vendor can no

longer own elements

• Upgradability must

be a key performance parameter

• Tradeoff

performance for upgradability and sustainability

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The Problem - DoD

Primary Structural Materials/Platforms Mechanical Systems/Weapon C4 ISR Infrastructure Sensors Communications IT Hardware IT Software 15 – 30 yrs 10 – 15 yrs 5 – 8 yrs 3 – 5 yrs 1 – 3 .5 - 2 .5 - 1

Improvised Explosive Devises

.01 - 1 Car Bombs .01 - 1

Technology Cycle Times

? ?

Incremental Acquisition (Pre-Planned Product Improvement) implies known or fixed requirements Evolutionary Acquisition implies evolutionary requirements

We cannot operate inside our enemies cycle time - processes are to cumbersome

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Impact of “Front-End” Investment A NASA View of the Benefits of SE Analysis of Gruhl's NASA Data

• 50

50 100 150 200 250 5 10 15 20 25 %RQTDEF

%

• Recent National Academies

study recommended that we spent more systems engineering resources during concept definition

• USAF has embraced this for

all future programs

• As complexity increases we

must spend more upfront to better develop requirements and manage expectations

• Upgradability (modularity,

“openness”, no propriatary software, COTs, etc) must be a key performance parameter when buying

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Must Better Manage Contractors

• Fewer contractors with decreasing

government budgets

• Are sophisticated global players
• Must be smarter buyers/contract writers
• Must develop like Toyota, Nokia, Apple
• Re-examine the relationships between

buyers and vendors

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Parametric Cost Estimation Analogy Detailed Engineering Build Up

Primary Technique Some Applicability Little or No Utility

Conceptual Exploratio n Component Advanced Develop- ment Systems Integration/ Preliminary Design Systems Demon- stration, Test, and Evaluation Productio n Operations, Support, & Disposal

How Do We Cost Systems

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Estimating Techniques

• Traditional approaches for measuring the technical scope of a

development project include top-down, bottoms-up, and analogous estimating techniques.

• Top-down estimation starts with an estimate for what the project can or

should cost and then allocates it to the various aspects of the project (management, systems engineering, software engineering, hardware engineering, integration testing, system delivery, and system support). – The top-down estimate is often used to obtain a rough-order-of- magnitude estimate of what the project should cost.

• Bottoms-up estimation relies on engineers and management personnel to

provide task-level estimates from a WBS at some level of detail based on experience; the task-level detail is then summed to produce an overall project estimate.

• Analogous estimation predicts future performance based on past

performance.

• It is normally best if more than one technique is used to estimate a

project’s technical scope, cost, and schedule for the purposes of accuracy.

• Type I (unknown cost categories) are more devastating than Type II (known

category but bad cost data)

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Cost and Schedule Estimates are constantly refined as the technical baseline work products are refined

Baseline Created Technical Work Products from which estimate is developed Typical review at which technical work products and associated cost / schedule are baselined. Methodologies used to develop cost (and schedule) estimate from technical work products Customer 1. Customer ( or Stakeholder / Business) Requirements

• Capabilities and

Characteristics

• 2. ConOps or Business processes

Business Requirements Review or Proposal Estimates are based on experience and historical data Estimates are a ROM (rough order of magnitude) and +- 75% Top Down

• Based on number / complexity of requirements
• Based on number / complexity of scenarios
• Based on external interface complexity

Analogous

• Estimate based on complexity of technical work products compared to similar complexity
• f known completed projects.

System 1. System Requirements – including high level test strategy for each requirement) 2. Preliminary Architecture System Requirements Review Estimates are based on experience and/or a tool (COTS or developed) Estimates are preliminary and +- 50% Top Down

• Based on number / complexity of requirements (functional and non-functional)
• Based on number / complexity of scenarios
• Based on architecture complexity, technology maturity, etc.

Analogous

• Estimate based on complexity of technical work products compared to similar complexity
• f known completed projects

Bottoms Up

• Estimates based on architecture

Component (HW, SW, Process) 1. Component Requirements (for each SW, HW, or process) – and test strategy. 2. System Architecture (documenting all HW, SW, and processes, and interfaces between them) 3. Test Architecture defined Preliminary Design Review Estimates usually developed using a tool (function point, COCOMO suite, number and complexity of HW components, WBS, etc). Estimates are detailed and +- 10% Bottoms Up

• Estimates from each development group providing their cost and schedule based on the

requirements allocated to their component, the system architecture, and the technologies selected. Design, Test, and Production 1. HW, SW, and Process Design 2. Test strategies, plans, cases, environment setup 3. System into Production (SW, HW, and processes) and Service Level Agreements 1. Critical Design Review 2. Test Readiness Review 3. Production Readiness Review Estimates are based on detailed technical work products Bottoms Up 1.Updated cost and schedule estimates based on design details 2.Test cost and schedule updated estimates based on technical work products 3.Operational, support, and maintenance costs updated based on delivered solution

The Problem

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• Introduction
• The Classical Systems

Challenges

• Stability and Reconstruction
• Enterprise Challenges Versus

Systems

• Learning Organizations
• Summary

Agenda

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S&R Is A Complex System

Surprising Emergence Evolves on Its Own as a Whole Acts Robustly Thrives on Diversity Many Factors at Play Stimulates Different Perspectives Ever Changing Informs the Observer Performs Openly Internal and External Relationships are Key Self-Organized Sensitive to Small Effects Exhibits Tight and Loose Couplings

System SoS Enterprise Complex System

From work by Brian White at Mitre and Vernon Ireland

Increases in Complexity Produces

• More Stakeholders
• More Requirements Creep
• Potential For Funding Cuts
• Complex Contractor/Subcontractor/Owner Relationships
• Challenges in Expectations Management
• Technology Challenges

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How do we invest scarce resources to promote cessation of COIN and promote stability and economic development?

Conflict Spectrum

Typical Timeline for a Typical Regional Conflict Year

1 2 3 4 5 6 7 8 9 10

Non-intervention Stabilization and Reconstruction (S&R)

Large- Scale Crisis

• r

Hostilities

Resources

COIN and/or Capacity Development Nation Reconstruction Capacity Development Nation Reconstruction Resources for Capacity Development, Reconstruction, Cultural Transformation and Understanding

Mission of the Center is to change how and when resources are allocated

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Some Thoughts About Stability and Reconstruction

Most of the challenges of reconstruction are social – values, corruption, traditional power bases, etc. Little thought given to the total ownership costs or how to sustain solutions Success is directly related to the lack of complexity We often do not understand the second order effects Must balance top down versus bottom ups development Non government organizations are the best executors of bottoms up development

Top Down

Viability of Government Governance Legitimacy Sustainable and Enduring Development

Bottom Up Effective Allocation

• f Resources

DoD Incremental Costs (Billions of FY 2004 Dollars) S&R Costs Fiscal years 1991-2004 200 150 100 50 Major Combat Operations Southwest Asia Somalia Haiti Bosnia Kosovo Afghanistan Iraq

Source DoD Comptroller and Congressional Research Service Incremental Costs are defined as costs to DoD in excess of normal peacetime operating expenses Slide taken from Defense Science Board 2004 Summer Study on Transition to and from Hostilities Current Incremental Cost in Iraq/Afghanistan is $5.7 billion/month

Major Combat Operations

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• Introduction
• The Classical Systems

Challenges

• Stability and

Reconstruction

• Life Cycle

Considerations

• Summary

Agenda

Design From the Perspective of the Developer Product Development Product Conception Production R&D Cost Operations and Support Costs Disposal Costs Life Cycle Cost Logistics Retirement Capital Investment

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Life Cycle Categories

Life Cycle Cost Categories

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Cost And Schedule Overruns On Time, On Budget Project

Cost Estimators Challenges

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Factors That Can Increase Prices

• Incomplete product specifications
• Evolving requirements
• Frequent change requests
• Supplier not meeting

commitment (consistently late deliveries, etc.)

• Frequent management/key

personnel changes

• Outsourcing
• Product is too complex
• Technology is not mature
• Lack of customer involvement
• Increased software requirements
• COIN
• Corruption
• Lack of competition
• Inefficient ownership (not wholly
• wned)
• Domain knowledge
• Lack of customer involvement
• Formal legal system
• Lack of infrastructure
• Product is to complex
• Lack of the human capital
• Infrastructure support
• Suppliers

Typical Complex System Reconstruction Project

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Project Management Hardware Systems Engineering Life Cycle Software Integration

Components of Systems Costing

Both are complex technical, economic, and sociological systems Traditional Systems Costing Reconstruction Costing

Project Management Infrastructure Support Unknown Life Cycle Acquisition/Constr uction Social Considerations

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Construction Costs (10- 15%) Operations and Maintenance of Facility (85- 90%) Supporting Infrastructure and Services Road improvements, Power, People, Equipment, Training, etc.

Components of S&R Costing

Capacity development must be considered in any nation building project

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• Introduction
• The Classical Systems

Challenges

• Stability and

Reconstruction

• Life Cycle

Considerations

• Summary

Agenda

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• About $1.4T has been spent by the US in

Iraq/Afghanistan since 2001

• Several hundred $B ($53B in Iraq) between DoS,

USAID, DoD/CERP, DoJ, DoA, NGOs, etc. for reconstruction and not stability operations

• Poor job of building partner capacity and

sustainable development

• Traditional methods (PCE, Bottoms up, etc) of

cost estimating are difficult to use

• We must take a holistic approach to

reconstruction projects ….addressing only acquisition costs waste scarce resources

Summary

“This is the fault of the Americans,” the deputy minister of electricity, Ra’ad al-Haras, said. “They put in place a big, wide-open democracy after the

• regime. They went from zero democracy to 100 percent. Democracy has to

be step by step. You see the result. (from the NY Times)

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Summary

For Systems We Must Change the acquisition system – DoD 5000 Write good requirements Experienced SE, PM, etc., throughout the life cycle Openness must drive solutions Buy it only if we can pay the TOC Instill a TOC perspective Better manage early cost expectations Incentivize contractors to save money Develop SoS and complex systems methods For Stability and Reconstruction We Must Invest in capacity development before projects Invest in the NGOs (bottoms up) Ensure that the projects align with international goals Understand the second order effects Do no judge (or contract) based upon our values

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Portfolio Problem

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