Methods to Analyze Services Portfolio Cost Drivers and Efficiencies
Introduction: This presentation provides a statistical methodology used to evaluate the “health” of a services portfolio through performance data analysis and cost analysis, with the goal to identify cost drivers and efficiencies for performance improvement.
Background: Managing a Federal government portfolio is a complex endeavor. Portfolio Managers have a major responsibility to evaluate whether their portfolio is operating efficiently and effectively. Thus, they need to use analytical procedures that, when executed, will evaluate the “health” of the portfolio and identify areas for increased efficiency and effectiveness. If the analysis is not data-driven, this leads to a lack of proper business case analysis and cost benefit analysis to weed out bad actors in the portfolio.
Methodology: The portfolio managers need to validate the portfolio – review the data in the portfolio, including identifying resources not captured in the portfolio, but should be, and assess the portfolio – take a deep dive into the portfolio prices and fees paid, benchmarking other services, and looking at trade-offs of functions. The robustness of the analysis must be strong enough to indicate efficiencies to the portfolio to include resource levels, skill sets, portfolio standards, service level categories and the overall use of the services. This presentation addresses accepted methodologies which can be can be utilized. It, also, shows how analytical techniques must be tailored to the type and amount of data available.
The methodology selected provided a comparative analysis to include a “within” assessment of the total portfolio data and a “between” assessments of the major cost driving services. Analytical techniques included, but were not limited to, descriptive data statistics, scatter plotting, bar graphs and pie charts. Descriptive data statistics would point out cost driver scaling. Scatter plotting would indicate data consistency by illustrating rate distributions and rates outside the statistical limits, and special effects on contract cost, and outlier population. Bar graphs were used to introduce commonality in rates to include labor category labor rate comparisons, labor and contract utilization across the portfolio, and the effects of a representative skill mix. Pie charts illustrated various distribution percentages across the portfolio.
Results: With these methodologies, the Portfolio Manager was able to determine the service rate statistical ranges and outliers, benchmarked fees throughout the portfolio, compare Prime and Subcontractor rates and the overall Subcontractor effect on the cost of the contract; and compare utilization rates to contracted rates as a performance indicator.
Valerie Reinert, Lead Cost Estimation/Analyst with MITRE Corporation. She has over 25 years of experience as a Cost Engineer. She has developed and employed evaluative methodologies, recently for Portfolio analysis, presenting to technical forums. She has written research papers in the areas of Agile Software Cost Estimation, Costs of Cloud Computing and Total Cost of Ownership of Open Source Software. Ms Reinert retired as a Navy Commander, 23 years. She was a Fellow with the Center for Naval Analysis. Her military awards include the Meritorious Service Medal, Navy Commendation Medal and the Joint Service Commendation Metal. Ms Reinert possesses a BA in Chemistry Education, University of South Florida; MEd, University of West Georgia; MS in Operations Research, Naval Postgraduate School. She has co-written papers in the area of Naval Manpower and has been a guest speaker at the Military Operations Research Society symposium. She is DAWIA Level I Cost Estimating.
Virginia Wydler, Principal Analyst with the MITRE Corporation. She has more than 25 years of experience in Federal acquisition, both government and commercial. She is a former Navy Contracting Officer for major acquisitions. She was a consultant with Booz Allen Hamilton and EDS Corporation. She holds an M.S. in National Security Strategy, Industrial College of the Armed Forces; M.S. in Acquisition and Contracting, Naval Postgraduate School; and B.S. in Business Administration, University of Maryland. She is Certified Professional Contracts Manager (CPCM), and Fellow with National Contract Management Association (NCMA). She was DAWIA Level III Contracting.