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A Process for Translating Project Risks into Cost Risk

Risk Track

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Space system development projects typically have processes defined to manage technical and programmatic risks. These processes usually include some combination of risk identification, quantification, and mitigation. The standard 5×5 risk matrix can be used to display the current risks and the changes over time. The 5×5 risk matrix requires the quantification of the likelihood of a risk occurring and the consequence if the risk does occur. This information may be incorporated into the project budget as liens or it may be tracked separately from the budget process.

Concurrently, many organizations require a probabilistic cost estimate as part of the budget process. The cost risk represented by the probabilistic cost analysis has not historically been traceable to the technical and programmatic risk process. This paper presents a method for translating the risks identified and quantified by typical risk management processes into a cost risk distribution that can be used in a probabilistic cost estimate. This estimate can be used to determine the appropriate reserve posture based

on a project’s specific risks. The process will be described, the advantages and limitations will be discussed, and an example of its implementation will be provided.


David R. Graham
Before coming back to the Air Force Cost Analysis Agency, David worked at NASA HQ’s in Washington DC from April 2003 – May 2008. Prior to his NASA assignment, he worked at the Aerospace Corporation for two years supporting the Intelligence Community Cost Analysis Improvement Group (IC CAIG). He began at the Space & Missile Systems Center (SMC), Los Angeles AFB, CA in Jan, 1979. He has held a variety of budget, cost performance, cost estimator, cost-risk and program analyst positions up to the present. His career has taken him from Los Angeles to Washington DC and back three times, finally coming back to where he started at SMC and living in the Hermosa Beach area. His work includes earned value analysis, cost estimating, cost-risk analysis, cost as an independent variable (CAIV), Activity Based Costing, aircraft modification financial analysis and space launch range pricing. Most recently, he is focusing on scenario-based discrete cost-risk assessment and analysis utilizing the likelihood vs consequence risk matrix and extending that qualitative analysis into more quantitative results expressed as statistical confidence levels. David is a SCEA Certified Cost Estimator and a present SCEA Board Member.

Robert Kellogg
Robert Kellogg is a Senior Engineering Specialist in the Space Architecture Department at The Aerospace Corporation. He has 25 years of experience in systems engineering of optical and other sensors. His currently focused on the programmatic aspects of space systems for the Air Force, NASA, and other customers. Prior to joining The Aerospace Corporation, Mr. Kellogg was a senior engineering specialist specializing in the design and manufacture of optical systems at Pacific Optical and a member of the technical staff specializing in optical design at Hughes Aircraft Company. He has a B.S. and M.S. in Optics from the University of Rochester.

Robert Bitten
Bob Bitten works at The Aerospace Corporation and has conducted independent cost estimates for NASA proposal evaluations and independent assessments for a variety of different NASA missions and organizations. Bob is a winner of the President’s Award, The Aerospace Corporation’s highest honor, for his effort in assessing the cost effectiveness of different alternatives in the in the Hubble Space Telescope Remote Servicing Module (HST RSM) Analysis of Alternatives (AoA). Bob also recently won the NASA Cost Estimating Support Contractor of the Year Award for 2007 that is awarded to recognize an individual who has provided “outstanding contractor support to the NASA cost estimating community and significantly contributed to the field of cost estimating.”

Debra Emmons
Debra Emmons works at The Aerospace Corporation where she has developed a unique, quantitative schedule analysis tool using historical data. She has used this tool on several NASA proposal evaluations and independent assessments. In 2006, Ms. Emmons won The Aerospace Corporation’s highest honor, The President’s Award, for utilizing her unique methodology to conduct schedule analysis that was critical to the conclusions drawn in the HST RSM AoA. Debra is also a winner of The Aerospace Corporation’s Woman of the Year Award for 2007 which is awarded to Aerospace women who
“demonstrate outstanding professional achievement, leadership, community involvement, and initiative”.

Russell (Randy) Persinger
Prior to joining Aerospace in the Civil and Commercial Organization, Randy Persinger spent 28 years in the commercial communications industry working both for a leading spacecraft contractor, Boeing, and as an international consultant for COMSAT representing many telecommunications customers during the definition, procurement and successful implementation of new space architectures and systems. While at Boeing, he worked on programs as a systems engineer, Chief Engineer and as a Deputy Program Manager. He also has been a capture manager with several program wins. He is currently focused on the programmatic aspects of space systems for NASA, and other commercial customers. This support ranges from proposal evaluation, risk mitigation of satellites under construction as well as analysis of alternatives and cost/risk assessments. Randy has a B.S. and M.S. in Electrical Engineering from Virginia Tech located in Blacksburg, Virginia.