Understanding Risk in the Budgeting Process from a Portfolio Point of View
The Office of the Director of National Intelligence (ODNI) Cost Analysis Improvement Group (CAIG) is responsible for conducting independent cost estimates (ICE) for Intelligence Community (IC) acquisitions at or above the major system acquisition (MSA) threshold of $170M. IC agencies are required, by law, to budget to the ODNI CAIG ICE or endorsed Agency Cost Position (ACP) for all acquisitions above a $500M threshold.
During the budgeting process, the IC agencies work with the ODNI to develop the appropriate inputs and secure the necessary funding. Without top-of-the-line increases to an Agency’s budget, budgeting to the ODNI CAIG ICE for MSAs often means pulling funds from other non- MSA programs within that agency, or delaying the delivery of certain capabilities.
Understanding the trade between budgeting to the ICE for MSAs and delaying the delivery of a capability for either MSAs or non-MSAs is essential to the decision making process. If the decision is made to not budget to the mean of the ODNI CAIG ICE, then there may be schedule, technical, and cost risks associated with that decision. In order to adequately make that decision, senior leaders need to have an understanding of how much risk they are assuming by not funding to the ICE.
The assumption of risk is often not completely understood, especially when trying to bridge the gap among policy, implementation, and day-to-day execution of a program. Since the ODNI’s portfolio is a collection of the IC agencies’ portfolios, understanding the risk impacts of potential trades between portfolios in terms of delivered capability is essential to the decision making process.
This paper outlines a process to follow and details the potential outputs of a Monte Carlo based risk analysis at a portfolio level. Risk is assessed for every MSA within an agency’s portfolio. Combining the risk distributions across a certain FYDP, obtaining a Portfolio cumulative distribution function (CDF), and then comparing the mean of that Portfolio to the budgeted amount for those MSAs provides an initial step for this analysis. Next steps include understanding the potential additional cost impacts (in the following years) of not funding to the ICE and determining how far “up” the S-curve (CDF) the Portfolio moves based on that decision.
Mr. Boulais began his career in 1998 as a Military Intelligence officer with assignments in Bamberg and Wurzburg, Germany, Fort Monroe, VA, and a deployment to Kosovo. In 2003, he accepted a position with Northrop Grumman TASC as a cost analyst supporting customers at the NGA, MDA, Navy, and internal corporate customers. In 2004 he was promoted to Section Manager. In 2006, Mr. Boulais was recalled from the Army’s individual ready reserve (IRR), re-designated as a Civil Affairs officer and deployed to Baghdad, Iraq for a year where he served as the Economic Team Leader for the Baghdad Provincial Reconstruction Team (PRT) and the Executive Officer to the US Ambassador in charge of reconstruction for Iraq. Upon his return, he resumed his career at TASC as a Section Manager with customers at the NGA, NRO, and JFCOM.
In January 2009, Mr. Boulais joined Scitor Corporation. He has supported various customers within the NRO including leading a business process re-engineering (BPR) effort in the FM environment and developing a risk-adjusted independent cost estimate for a source selection effort. In his current role, Mr. Boulais is the contractor research lead at the ODNI Cost Analysis Improvement Group.
Mr. Boulais received a B.S. in Operations Research from the United States Military Academy at West Point in 1998 and an M.A. in Systems and Information Engineering from the University of Virginia in 2004.
Brett Dickey received his B.S. and M.S in Systems Engineering from the University of Virginia in 2006 and 2008, respectively. After graduating, Mr. Dickey worked as a cost analyst at TASC, providing Independent Life‐Cycle Cost Estimates (I‐LCCEs), TASC‐internal cost estimates, and proposal support. Mr. Dickey currently works at Scitor Corporation where he provides support to the Office of the Director of National Intelligence (ODNI) Systems and Resources Analysis (SRA) Cost Analysis (CA) group, primarily developing Independent Cost Estimates (ICEs) for the Intelligence Community (IC) and conducting research to improve upon current costing methods and tools.
Quaternion Consulting Inc.
Matt Reiley is a Senior Analyst at Quaternion Consulting Inc. (QCI) where he serves as the contractor cost analysis technical lead for the Office of the Director of National Intelligence (ODNI) Cost Analysis Improvement Group (CAIG). He has ten years of experience performing cost and risk analysis, including Intelligence Community Major System Acquisition Independent Cost Estimates and Assessments, Architectural Trade Studies, Analysis of Alternatives, and methods and model developments. Matt has supported the ODNI CAIG since its inception in 2005 and prior to that time supported the Director of Central Intelligence (DCI) Community Management Staff (CMS) and the National Reconnaissance Office (NRO) CAIG. He received a B.S. in Mechanical Engineering from Pennsylvania State University