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Error Analysis of a Custom Cost Model

Parametrics Track



How do you know how well a custom cost model performs? If it is based on historical data, then the simplest performance measurement is the model’s percent standard error (PSE). The PSE measures a historically-derived model’s ability to re-predict its underlying database. In this presentation we will demonstrate an analytic error analysis of a custom cost model using historically-derived cost estimating relationships (CERs) and factors. We will provide a sample model and show how we calculated the PSE of each of the CERs from the data as well as developing the error calculations for each step in the model. We will show how we used the concepts of effective correlation coefficients, propagation of errors, and the calculated variances of the sums and differences of two random variables.


Raymond P. Covert
Raymond P. Covert, Technical Director and Chief Practitioner for Cost and Schedule Analysis at MCR, is responsible for ensuring technical excellence of MCR products, services, and processes by encouraging process improvement, maintaining quality control, and training employees and government and industrial customers in cost and schedule analysis and associated program-control disciplines. He has given numerous technical and tutorial presentations on cost-risk analysis, cost-estimating relationship development, and other statistical aspects of cost and economics to DoD, NASA, and EACE (European Aerospace Working Group on Cost Engineering) Cost Symposia, the AF/NASA/ESA Space Systems Cost Analysis Group (SSCAG), and professional societies such as the International Society of Parametric Analysts (ISPA), Society for Cost Estimating and Analysis (SCEA), Military Operations Research Society (MORS), U.K. Association of Cost Engineers (ACostE), and the American Institute of Aeronautics and Astronautics (AIAA).

Donald L. Trapp
MCR Federal, LLC
Mr. Trapp is a Technical Manager at MCR, LLC. He has been involved with cost and system analysis for defense and space systems for the past forty years. During that time he has also been employed at The RAND Corporation, SAIC, and the Office of the Secretary of Defense, where he was responsible for cost analysis of all missile systems and all strategic defensive systems. He has specific experience in cost analysis, economic analysis, systems analysis, parametric analysis, and risk analysis. He received his BS in Engineering Science from Harvey Mudd College and his Masters in Nuclear Engineering from M.I.T.

Noah L. Wright
MCR Federal, LLC
Mr. Wright is a junior Cost and Project Control Analyst at MCR, LLC. He has been involved with developing Cost Estimating Relationships and factors for missile programs. Prior to working with MCR he served for five years in the Marine Corps with two air control squadrons as an air control electronics operator. His specific experience covers both cost and schedule with regards to analysis and estimating, along with cost modeling using advanced statistical methods, and schedule development and maintenance. He received his BS in Business Administration degree in 2009 from the University of Central Florida and is currently a 2013 MBA Candidate at Rollins College.