EELV Should Cost Review Overview and Lessons Learned
In his September 14, 2010 “Memorandum for Acquisition Professionals”, Ashton Carter, the Undersecretary of Defense for Acquisition Technology and Logistics, directed that “the manager of each major program conduct a Should Cost analysis justifying each element of program cost…” In early March of 2010, as a response to significant pending contract price increases, supplier readiness uncertainty, and unresolved Defense Contract Audit Agency (DCAA) audit issues, Michael Donley, the Department of Defense (DoD) Executive Agent for Space directed a Should Cost Review (SCR) of the Evolved Expendable Launch Vehicle (EELV) program. A Should Cost Review is described in Federal Acquisition Regulation (FAR) part 15.407.4 as a specialized form of cost analysis, accomplished by a multi-functional team of experts which evaluates the “economy and efficiency of the contractor’s existing workforce…” and processes. A key aspect of a SCR is that it does not assume a contractor’s historical costs reflect efficient and economical operation. From May through October of 2010, the presenters were part of the 95 person SCR team that conducted a detailed evaluation of the United Launch Alliance (ULA) contractor and their major sub-contractors with the stated goals of evaluating the efficiency of contractor operations, identifying cost reduction initiatives (CRIs), supporting the government’s FY11/FY12 contract negotiation positions, and providing additional justification for the FY12 POM. In this presentation, the authors will describe their experience with the EELV Should Cost Review and identify best practices and lessons learned.
Mr. James Smirnoff is a Society of Cost Estimating and Analysis (SCEA) Certified Cost Estimator/Analyst (CCE/A) with over eight years experience in cost estimating and financial management of space, aircraft, and information technology acquisition programs for the Department of Defense (DoD) and other government agencies. Since October of 2009, Mr. Smirnoff has worked as a Cost Analyst for Wyle Labs supporting the National Reconnaissance Office Cost Analysis Improvement Group (NRO CAIG) in the areas of space hardware cost estimating, cost estimating relationship (CER) development, and launch cost modeling. Prior to the NRO CAIG, Mr. Smirnoff worked for two years as a Lead Economic Analyst with the MITRE Corporation supporting the Defense Information Systems Agency (DISA) and the United States Navy’s Littoral Surveillance Radar System (LSRS) Program Office. Mr. Smirnoff also served for seven years as an officer in the United States Air Force with assignments to Aeronautical Systems Center (ASC) at Wright-Patterson Air Force Base and to Space and Missile Systems Center (SMC) at Los Angeles Air Force Base. In 2008, he co-authored a journal article titled “The Impact of Economic Factors and Acquisition Reforms on the Cost of Defense Weapon Systems” which was published in the Review of Financial Economics. Mr. Smirnoff has a B.A. in Economics from Virginia Tech and an M.S. from the Air Force Institute of Technology (AFIT) in Cost Analysis.
NRO Cost Analysis Improvement Group (CAIG)
Karen M. Schaben joined the Central Intelligence Agency in 2005 and was assigned to the National Reconnaissance Office (NRO). During five years at the NRO, she worked in the NRO Cost Analysis Improvement Group (CAIG) where she developed Independent Cost Estimates for National Security Space Intelligence programs. Dual hated as the team lead for launch estimating and hardware data collection/methods development/special studies. She also serves as the focal point for external relations with the DNI, NGA, NASA, OSD, AFCAA, and SMC. Additionally, she leads the development of the NRO’s principal program cost and technical databases. Prior to joining the CIA, she served as a cost analyst, at MITRE and MCR, responsible for developing acquisition cost estimates for a variety of multi-billion dollar next generation air warfare systems. Her work included extensive efforts in developing cost estimates and unique cost methodologies for the Joint Strike Fighter Program.
Quanternion Consulting, Inc. (QCI)
Mr. Joe Kabeiseman has over twenty years of professional military, industry, and support contractor experience. Since May of 2010, Mr. Kabeiseman has worked as a Senior Cost Analyst for Quanternion Consulting, Inc. (QCI) supporting the National Reconnaissance Office Cost Analysis Improvement Group (NRO CAIG). Prior to joining QCI, he worked for MCR where he also supported the NRO CAIG as well as the Missile Defense Agency (MDA) Advanced Technology Directorate and MDA’s Aegis Ballistic Missile Defense (Aegis BMD) program office. For several years preceding this, he was self-employed and provided management and systems support consulting services to energy and telecommunications industries. Mr. Kabeiseman has also worked for Technomics, Inc. as a cost analyst and for Bosch and Allied Signal as a manufacturing engineer. While serving in the U.S. Navy, he flew the SH-2F and was a flight instructor in the T-34C. He has a B.S. in Industrial Engineering and Operations Research from Virginia Tech and an MBA from the University of Notre Dame.