National Reconnaissance Office (NRO) Experiences with the Implementation of Will Cost/Should Cost Management
The objective of this presentation is to address how to assess and incorporate contract performance in an Estimate to Complete, for the purpose of determining a reasonable amount of margin and how that margin should be managed and controlled. The discussion will go beyond cost and schedule variance to forecast total program cost including future requirements, other government costs, etc.
Four years ago, the NRO implemented a framework for will cost/should cost management. Under this framework, the Cost Analysis Improvement Group (CAIG) provides tracking and monitoring against the should cost estimate and trending and forecasting relative to the will cost estimate. This allows NRO senior management to understand the performance of programs in the portfolio and influence acquisition outcomes.
Through will cost/should cost, NRO Senior Leadership holds contractors and program managers accountable to forward-leaning cost and schedule targets, while concurrently assessing and effectively optimizing margin across the portfolio to enable successful acquisitions. This process provided NRO senior leaders with new insight into program performance, risks, and margin. It has been used to inform the budgeting process and influence the NRO’s planning for a response to sequestration. Last year, the team responsible for implementing the will cost/should cost framework was recognized with a Director’s Team of the Year award. We will share our analytic techniques and lessons learned.
The presentation will include discussion of the following:
• The NRO Cost Analysis Improvement Group’s (CAIG) EAC prediction capability: We develop and apply innovative techniques for quantitative analysis of performance to date to generate forecasts of future cost growth, and predict the need for margin. The Estimate at Complete (EAC) Maturity Model is a parametric way to estimate future EAC growth based on cost drivers. The Weibull Analysis Method (WAM) determines our confidence that funds remaining above liability will be sufficient to cover expected growth.
• Government Estimate at Complete (GEAC) Analysis: We integrate these analytic techniques to assess the should cost estimates provided by program offices. We perform cross program analysis to assess program performance and margin across the portfolio of programs.
Booz Allen Hamilton
Sissy Gregg is performing an integration role between Earned Value Management and Cost Estimation supporting the National Reconnaissance Office (NRO) Cost Analysis Improvement Group (CAIG). Ms. Gregg has nine years of experience in cost analysis to include estimating ground systems to support space borne reconnaissance, weapon system acquisition, operations research, and financial management. She has managed budgets and finances, provided system and program level health analysis, prepared earned value management reports, and conducted cost analyses to support decision making within the Air Force, Intelligence and Government agencies, and Department of Defense programs. She is knowledgeable in a multitude of topics such as life cycle cost estimating, earned value management, business process reengineering, cost risk analysis and cost model development. Prior to joining Booz Allen, Ms. Gregg supported other Defense industry contractors performing as a deputy to Program Mangers in their absence.
Gregory J. Lochbaum joined the NRO/CAAG in March 2004. He currently serves as Chief of the Cross-Program Analysis Group in the CAAG. Prior to this position, Mr. Lochbaum served as Chief of the SIGINT Group, Chief of the COMM Group, and as the team lead on a designated IMINT Program.
Prior to joining the NRO/CAAG, he served as a US Air Force officer in a variety of financial management, acquisition, and logistics positions, including: as Director of the Forces Analysis Division at HQ USAF, Director of the Cost Reporting Division at HQ USAF, Chief of C31 Division at the Air Force Cost Analysis Agency, and Program Control Chief for the Communications Directorate at Electronics Systems Division. Greg retired from the Air Force in May 2004 after 25 years of service.
Burgess Consulting, Inc.
Erik Burgess has provided cost estimating and program support to the National Reconnaissance Office since 1995, and prior to that he supported space programs at the USAF Space and Missile Systems Center as an engineer and cost estimator. He is the president of Burgess Consulting Inc., and has also served with The Aerospace Corporation, PriceWaterhouseCoopers, and MCR, LLC. Mr. Burgess earned his M.S. and B.S. in Mechanical Engineering from the Massachusetts Institute of Technology.