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Development of Parametric Estimating Capability within BAE Systems Global Combat Systems

SCAF Seminar, London, 21 st September 2010

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Introduction

– BAE Systems is a global defence, security and aerospace company delivering a full range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and customer support services.

– Key facts:– 107,000 Highly Skilled People– Global Capability– Customers in over 100 countries– Annual sales exceed £22.4 billion– Around 200 inventions patented globally every year– Operations in seven home markets

– The focus of this presentation is on the developments within the Costing and Pricing Function of the Global Combat Systems (GCS) BusinessUnit.

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BAE Systems plc

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GCS Costing & Pricing Processes

– In 2008 the BAE Systems End to End (E2E) estimating process was adopted by GCS

– Part of an ongoing process of functional improvement and development

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Parametrics

– “The expectation of a parametric model is that it will estimate costs virtually instantaneously and accurately if the correct information is entered with respect to its parameters … there is even higher expectation, namely that a parametric model will do these thingsquicker and better than alternative methods”

– (Parametric Estimating Handbook 4th Edition, cited in Defence Equipment and Support (DE&S) ‘The Forecasting Guidebook’, p19)

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Development Drivers

– Customer Requirement – Parametric Estimating is becoming an important tool for the customer

– Bernard Gray Report:

– “mandatory use should be made of parametric data”– “more high quality cost estimators and parametric modelling tools would

assist in material costing”

– Cost Assurance & Analysis Service (CAAS) are also increasing the use of Parametrics

– Parametrics features within the DE&S Forecasting Guide

– Industry Standard– Competitors, Partners and Suppliers are developing the capability

– Other Business Units within BAE Systems are using it and have proven it successful

– Sharing of best practise and experience

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Parametric Estimating

– Parametric Estimating is a costing technique that uses a number of Cost Estimating Relationships (CERs) built into a mathematical model

– CERs are links between key characteristics and costs, they are effectively the cost drivers

– Complexity is derived from a variety of factors which impact on its costs

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Development Activity

– To develop the Parametric Capability:– The toolset needs to be Calibrated– GCS need to establish CERs– Establish the link between CERs and Complexity through Database– Through trend analysis of the Database produce a ‘Complexity

Calculator ’ to support future estimates

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Calibration

– Calibration is the process of tailoring the industry average Parametric Model to reflect the BAE Systems Process to improve its accuracy

– It involves the following stages:– Collection of Recorded Costs

– Cost Object Calibration– Organisation Calibration

– Once complete, the calibrated values can be used on future projects– The level of recorded costs available is currently limiting the scope of

calibration possible

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Calibration – Top Level Example

– Demonstration and Manufacturing Contract for Engineering Tank System– Recorded Weights and Volume has been received from Engineering

– Recorded Total System Cost has come from GCS’ Cost Recording System

– Templates developed from Detailed Calibration have been used– Model of the System was created

– It was agreed that it was XX% new design as the Hull comes from an existing vehicle

– Model was calibrated to find the Manufacturing Complexity that produces the recorded cost

– Output is a complexity of X.025 for the total System

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Cost Estimating Relationships

– Cost Estimating Relationships– Weight and Volume are key cost drivers, however there are other factors

that impact on the cost

– Within the Parametric tool these ‘other factors’ are represented by Complexity

– The relationship needs to be developed between the drivers of cost and the Complexity Value

– Identifying CERs– Through modelling past projects and identifying key elements which impact

on their cost– Top level CERs identified are: Vehicle Type, Vehicle Role & Manufacturing

Site.

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Database

– A database of all the modelled components has been created– This contains the recorded data with the corresponding complexities, so

that if a similar sub assembly/system is to be priced the information is available

– The database is used to develop trends with regards to Cost Estimating Relationships

– The database feeds into the Complexity Calculator, it currently contains 16 Systems covering a range of roles, types and manufacturing sites

– An example of the data captured for each system:

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Complexity Calculator

– The database is populated with information from Top Level Calibrations– Trend Analysis can now be conducted against this data– A selection of Cost drivers have been identified– The model outputs the complexity factor for a system against the

selected drivers for an identified In Service Date (ISD)– It also provides additional information around the confidence– Currently this is at a System Level

– Confidence in the complexity is driven by:– Source of data e.g. Recorded, Quotes or Estimates

– Correlation co-efficient (strength of relationship)

– Number of data points

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Calculators – Manufacturing Complexity

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Example Scenario

– Main Battle Tank– Tracked Vehicle– Manufacturing Site not decided– ISD 2030– What is the complexity to include within the Parametric Model?

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Potential Use

– Having developed the capability, GCS have also identified and tested the following uses for Parametrics:– Price to Win

Through modelling the Customers budget and competitors solution

– Should CostsThrough use of the calibrated tool and complexity calculator

– Design to Costs

The toolsets allow you to set a Target cost and will output the impact of this on design complexity or quantity for example

– Through Life Costs

Parametrics allows these to be considered at an earlier stage as well

– Design DecisionsAs it is quicker to model different scenarios it can be used to support design

decisions as they are being made to prevent wasted effort

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Further Development

– Expand Complexity Calculator– Sub Assembly information can improve the CERs used

– Trials Calculator– Trials costs are often calculated separately – A standalone Trials cost calculator can be developed

– A relationship can be derived between the type and complexity of the vehicle and the amount/type/cost of trials required

– Risk Calculator– Estimate potential Risk Value before project details are known

– Templates– Improve ease of use and consistency e.g. Blank Cost Models, Input Sheets

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Conclusion

– There is a clear requirement for developing a Parametric Estimating Capability

– It can fit within the existing processes– Use of the ‘Complexity Calculator’ supports the use of Parametric

Toolsets– Potential uses have been identified– Further development is required– Limitations have been identified, but can be managed

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Any Questions?