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Targeting Affordability and Controlling Cost Growth through Should-Cost Analysis

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On September 14th, 2010, The Honorable Ashton B. Carter; Under Secretary of Defense for Acquisition, Technology and Logistics, released a memorandum addressed to the acquisition professionals of the Department of Defense. The primary thrust of the memorandum was the current need for greater efficiency and productivity in defense spending. Secretary Carter provided guidance organized into five initiatives:

1. Target Affordability and Control Cost Growth
2. Incentivize Productivity and Innovation in Industry
3. Promote Real Competition
4. Improve Tradecraft in Services Acquisition
5. Reduce Non-Productive Processes and Bureaucracy

The first initiative mandates the use of Should-Cost Analysis along with Will-Cost Analysis to establish affordability targets and control cost growth.

This paper will discuss a step-by-step should-cost analysis and affordability management process. It will demonstrate the value of integrating agile cost estimating models into the process. Actual case studies of programs that succeeded and failed with should-cost analyses will be presented.


Anthony A DeMarco
PRICE Systems, L.L.C.
Mr. DeMarco is the President and Managing Member of PRICE Systems L.L.C., a privately held company in Mt. Laurel, New Jersey. PRICE is the world leader in Parametric Planning, Estimating, and Budgeting tools and services with clients in the North America, South America, Europe, and Asia. PRICE introduced the first commercially available Hardware and Software Cost Estimating Models in 1975 and attained its industry leading position through dedication to speed, quality and customer satisfaction.

Mr. DeMarco received a Bachelors degree in Mathematics from St. Joseph’s University in Philadelphia, Pennsylvania, and a Masters degree in Computer Science from the New Jersey Institute of Technology in Newark, NJ.

Since joining PRICE Systems in 1981, Mr. DeMarco’s accomplishments include the development of the PRICE electronics cost model (PRICE M), major enhancements to the PRICE hardware model (PRICE H), and the personal computer program XPERT/H. As PRICE Product Development Manager for several years, Mr. DeMarco led a team of operations researchers, logisticians and computer scientists in the development of parametric models and tools to serve the cost estimating and analysis community. During his tenure as the leader of PRICE Systems, PRICE migrated its tools to desktop and client/server computing platforms and has introduced several new services including professional services, tailored on-site training, the PRICE Knowledge Manager, and PRICE TruePlanning.

Mr. DeMarco is a recognized expert and frequent speaker on predictive cost modeling for optimizing planning, budgeting, and cost management. He has contributed over 20 papers on cost estimating, analysis and management and is cited on two U.S. patents for cost estimating techniques. In 1997, Mr. DeMarco received the highest honor bestowed by the International Society of Parametric Analysts (ISPA), the Freiman Award. In 2001, Mr. DeMarco served on the NASA International Space Station Management and Cost Evaluation Task Force (IMCE) to help address cost growth on the program. Mr. DeMarco works with many cost engineering societies and is the President of the National Defense Industrial Association (NDIA) Delaware Valley Chapter.

In 1998, Mr. DeMarco led the management buyout of the PRICE Systems business unit from the Lockheed Martin Corporation to form PRICE Systems, L.L.C. PRICE is now an independent employee-owned business dedicated to helping enterprises sustain profitable growth through faster, better planning, estimating and budgeting.