“To b or Not to b” The y-intercept in cost estimation
There is considerable, if low-key controversy over the y-intercept in cost estimation. The controversy, although more common than one would suppose, has received surprisingly little attention in societies and publications, but the authors have found that it is a controversy nonetheless, and one with sometimes significant implications. There are proponents that argue that all or most cost estimating relationships (CERs) should necessarily pass through the origin, and those that argue that they need not do so. Many estimators, in making adjustments to analogies, creating rates and factors, determining metrics or thumb rules, and by choosing specific power function forms are inadvertently taking a position on this subject and yet are completely unaware that they are doing so.
The authors will discuss what the statistical literature says about the y intercept, indicate what the “to b” and “not to b” camps believe the arguments are for their positions, will indicate what the implications are in taking either position, will show when a choice is being made unwillingly, and will make a few anecdotal observations. The paper will end with their recommendations on this hitherto quiet but nonetheless important debate.
Richard L. Coleman is a 1968 Naval Academy graduate, received an M. S. with Distinction from the U. S. Naval Postgraduate School and retired from active duty as a Captain, USN, in 1993. His service included tours as Commanding Officer of USS Dewey (DDG 45), and as Director, Naval Center for Cost Analysis. He has worked extensively in cost, CAIV, and risk for the Missile Defence Agency (MDA), Navy ARO, the intelligence community, NAVAIR, and the DD(X) Design Agent team. He has provided cost estimating support on numerous ship programs including DD(X) (now DDG 1000), the DDG 51 class, Deepwater, LHD 8 and LHA 6, the LPD 17 class, the Enhanced Patrol Craft Demonstrator, Virginia class submarines, CVN 77, CVN 21 Construction Preparation, CVN 78 as well as for Hurricane Katrina damage and Business Interruption analysis. He is now the Director of the Cost and Price Analysis Center of Excellence and conducts Independent Cost Evaluations on Northrop Grumman programs. He has more than 60 professional papers to his credit, including six ISPA/SCEA and SCEA Best Paper Awards and two ADoDCAS Outstanding Contributed Papers. He was a senior reviewer for all the SCEA Professional training course (CostPROF) modules and lead author of the Risk Module. He served as Regional and National Vice President of SCEA and is now Director of Research.
Jessica R. Summerville graduated with a B.A. in Mathematics from the University of Michigan in 1994. She received an M.S. in Operations Research from the College of
William and Mary in 1995. During her Masters program, she worked as a Programmer/Analyst at SAIC in support of NASA programs. She was Manager of the Risk and Cost Analysis Department and worked mainly in the areas of cost and risk analysis. She currently supports a major government customer doing statistical analysis and Operations Research modeling. She has led multiple projects in support of several different customers, including the Missile Defense Agency (MDA), NAVAIR, intelligence community projects, and the DD(X) Design Agent team. She has supported numerous ship programs including DD(X), the DDG 51 class, Deepwater, LHD 8 and LHA 6, the LPD 17 class, Virginia class submarines, CNN 77, and CVN 21. In addition, she authored the regression analysis module for CostPROF, the official Society for Cost Estimating and Analysis (SCEA) training course, and was a key player in developing several other modules. She is an author of over 30 papers including two SCEA Best Paper Awards and an ADoDCAS Outstanding Contributed Paper.
Peter J. Braxton holds an AB in Mathematics from Princeton University and an M. S. in Applied Science (Operations Research) from the College of William and Mary.
He has worked to advance the state of knowledge of cost estimating, Cost As an Independent Variable (CAIV), Target Costing, and risk analysis on behalf of the Navy Acquisition Reform Office (ARO), the DD(X) development program, and other ship and intelligence community programs. He has co-authored several professional papers, including ISPA/SCEA International Conference award-winners in CAIV (1999) and Management (2005). He served as managing editor for the original development of the acclaimed Cost Programmed Review Of Fundamentals (CostPROF) body of knowledge and training course materials and is currently undertaking to lead a large team of cost professional in a comprehensive update thereof. He serves as SCEA’s Director of Training and was recently appointed a Northrop Grumman Technical Fellow.
Bethia Cullis is an Operations Research Analyst at Northrop Grumman. She is currently the Program Manager for all Independent Cost Evaluations (ICEs) required by the IT, Newport News, Ship Systems and Technical Services sectors. In addition to her ICE work, Ms. Cullis has supported numerous ship programs including DD(X), the DDG 51 class, LHD 8 and LHA 6, the LPD 17 class and CVN 21. Before joining Northrop Grumman in 2004, Ms. Cullis completed her undergraduate degree in Economics and English at Case Western Reserve University. She also worked as an analyst for Newry Corporation, a competitive consulting firm in Cleveland, OH.
Eric Druker graduated from the College of William and Mary with a B.S. in Applied Mathematics in 2005 concentrating in both Operations Research and Probability & Statistics and a minor in Economics. Over the past two years he has been employed by Northrop Grumman as an Operations Research Analyst. He performs cost and risk analysis on several programs within both the Intelligence and DoD communities. Mr. Druker has also worked on high profile projects such as the Virginia Information Technology Agency and the United States Army Corps of Engineers (USACE) proposals. He was a recipient of the 2005 NGIT President’s award for his work on several high profile Independent Cost Evaluations during which he helped to develop the risk process currently used by NGIT’s ICE teams. He has also performed decision tree analysis for NG Corporate law and built models for Hurricane Katrina Impact Studies and Schedule/Cost Growth determination.