Every Airman a Force Multiplier

Every Airman a Force Multiplier

Brooks Brooks Acquisition Center of ExcellenceAcquisition Center of Excellence

Managing Risk in Your Managing Risk in Your AcquisitionAcquisition

Pat TinerPat Tiner311 HSW/AE311 HSW/AEDSN 240-5815DSN 240-581514 Mar 0614 Mar 06

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AgendaAgenda

• Guidance Guidance • Risk ManagementRisk Management• Risk AssessmentRisk Assessment

• Identification & AnalysisIdentification & Analysis• Risk Analysis ToolRisk Analysis Tool• Risk HandlingRisk Handling• RFP DiscriminatorsRFP Discriminators• SummarySummary

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GuidanceGuidance

• Defense Acquisition Guidebook •Numerous references to Risk Mgmt“The program manager should establish a risk management process within systems engineering that includes risk planning, risk assessment (identification and analysis), risk management, and risk monitoring approaches to be integrated and continuously applied throughout the program, including the design process.”

• FAR 7.105, In Acquisition Plan… “Discuss technical, cost, and schedule risks and describe what efforts are planned or underway to reduce risk and the consequences of failure to achieve goals.”

• AFI 63-124, Performance Based Services Acquisition“Ensuring performance management focuses on risk management, cost, and schedule and performance baselines.”

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Risk is…Risk is…

•“A measure of the potential inability to achieve overall program objectives within defined cost, schedule, and technical constraints”

•Two Components of Risk

•Probability of failing to achieve an outcome

•Consequence of failing to achieve that outcome

Chance

Impact

Challenge/Concern

Risk is inherent in any programRisk is inherent in any program

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RISKMANAGEMENT

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Risk ManagementRisk Management

• What? •Disciplined approach to reduce program risk to acceptable level •“Crystal-balling" possible future problems •Taking actions to head off or deal with these uncertainties

•Included in acquisition strategy

• Who? •All acquisition team members

• Program office, customer, key stake holders, industry

• When? •Throughout program from beginning to end

• Why? •If you understand your risks – in most cases you can mitigate them

Focus today will be on pre-award-- Focus today will be on pre-award-- risk based acquisition strategyrisk based acquisition strategy

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Types of RiskTypes of Risk

• Determined by “Who has control of the risk?

1. Internal Controlled by Organization Example: Team member pulled for other task

Mitigation: Not much you can do

2) Programmatic Controlled by Acquisition Strategy Example: High technology risk

Mitigation: Contract type, incentives, RFP evaluation criteria

3) Technical Controlled by Contract Performance Example: System will not meet key performance parameter

Mitigation: RFP evaluation criteria, post-award emphasis

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Risk - The Thread that BindsRisk - The Thread that Binds

RequirementsRISK

Acquisition Strategy

Internal

Programmatic

Technical

Discriminators

Sec M

Sec L

Organization

RMP

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PhasesPhases

Risk Management

Identification Analysis

AssessmentPlanning Handling Monitoring

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RISKASSESSMENT

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Identifying RisksIdentifying Risks

• Most important step

• Elaborate engineering & scientific methods used in systems acq• May not be appropriate for Services

• Other sound methods• Expert judgment

• Comparison with other programs

• Lessons learned

• Brainstorming

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Identifying Risks Identifying Risks (con’t)(con’t)

• Over the life of the program, what things could go wrong?Over the life of the program, what things could go wrong?

• Use nouns and verbs when stating risks Use nouns and verbs when stating risks • Not just topics Not just topics

• State as negative eventState as negative event

• Use IF/THEN statementsUse IF/THEN statements• ““If the proposed design requires any unique tools, support If the proposed design requires any unique tools, support

and/or test equipment, then it would increase LCC”and/or test equipment, then it would increase LCC”

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Root Cause - ExampleRoot Cause - Example

• Requirement: Contractor must provide technical support for environmental conservation planning and natural resource management.

• Risk: If contractor doesn’t provide needed support, then mission requirements will not be met.

• Risk: If contractor lacks sufficient technical expertise, then they will not be able to provide necessary support.

True but NOT SPECIFIC ENOUGH – Doesn’t get to root causeWon’t meet mission requirements – need to get at “WHY”

GETS TO THE ROOT CAUSE – contractor’s lack of expertise.This can be addressed in RFP!

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Analyzing RisksAnalyzing Risks

•Probablility• What is the chance of risk becoming reality?

Doubtful ( 0 -10%) Most likely will not occur

Unlikely (11 - 40%) Believe this will not occur

Chance (41 - 60%) Toss-of-coin

Likely (61 - 90%) Believe this will occur

Sure (91 - 100%) Most likely will occur

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Analyzing RisksAnalyzing Risks

•Consequence• What is the impact if risk becomes a reality?

NegligibleNegligible MinorMinor

ModerateModerate SeriousSerious

CriticalCritical

• Several ways to determineSeveral ways to determine• Level of attention• Impact of risk on Cost/Schedule/Performance

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Analyzing the ImpactAnalyzing the Impact

What level of attention is required to resolve?• Negligible

• Day-to-day issues

• Minor • PM/PM, programmatic workarounds required• Slip of weeks, cost increase > 10%

• Moderate • SPD/VP involvement, tactical workarounds required• 1-2 month slip, cost increase > 25%

• Serious • DPEO/Pres involvement, severe mission impact• Multi-month schedule slip, cost increase > 50%

• Critical • PEO/CEO involvement, mission failure• Program cancelled or major restructure

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Analyzing the Impact Analyzing the Impact (con’t)(con’t)

What is the Cost/schedule/performance impact?

• Negligible • Almost no effect on the program

• Minor • Small increase in cost/schedule• Requirements would still be achieved

• Moderate • Moderate increase in cost/schedule• Requirements would still be achieved

• Serious • Serious increase in cost/schedule• Secondary requirements may not be achieved

• Critical • Program failure

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Analyzing Risks - ExampleAnalyzing Risks - Example

• RiskIf service provider does not have experience in lodging mgmt, then rooms may not be available for use, resulting in added cost to Gov’t for off-base lodging.

Probability: Unlikely

• Logic in determining impact:• Quality of Life issue • Cost Issue

• Additional funds required to send personnel to off-base lodging

Consequence (Cost): Serious

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Risk Assessment RecapRisk Assessment Recap

• Follow these stepsFollow these steps

• ““Requirement is …”Requirement is …”

• ““Won’t meet the requirement because…” IDENTIFY RISKSWon’t meet the requirement because…” IDENTIFY RISKS

• ““Probability of risk occuring is …”Probability of risk occuring is …”

• ““Consequence of not meeting the requirement is …”Consequence of not meeting the requirement is …”

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Risk Analysis ToolRisk Analysis Tool• Probability/Consequence Screening (PC_S) software

• Developed by EN/ASC, WPAFB

• Outcomes• Risk Report

• Lists requirements, risks, assessment• Notes, assumptions, POC• Mitigation strategies

• Color-coded risk matrix• Visual depiction of all identified risks• Easily transferred to Power Point

• Download • DAU Acquisition Community Connection

• ACC→ Systems Engineering → SE Resources →Tools & Forms→ PC_S Software • PCS.zip file

hhttps://pmcop.ar.navy.mil/simplify/ev.php?URL_ID=7797&URL_DO=DO_TOPIC&URL_SECTION=201&reload=103

5566629

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Assessing Risks Assessing Risks using PC_S Softwareusing PC_S Software

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MatrixMatrix

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Risk ReportRisk Report

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RISKHANDLING

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RISK HANDLING RISK HANDLING STRATEGIESSTRATEGIES

• Avoid • Change requirement, practice, concept but still meet need

• Replace high risk with a lower risk solution• Critical to have clear understanding of requirements

• Mission Critical or “nice-to-have”

• Transfer• Redistribute risk among shareholders (could be contractor)

• Owner must be able to more effectively handle the risk• Reallocate risk from one part of system to another

• Assume the risk without special efforts• Conscious decision to accept risk• Appropriate for “low” risks• May be appropriate for high risk if worth the benefit• Worst-case outcome is being declared acceptable - be careful

• Control (Mitigate) through active steps• Reduce probability, consequence or both

• Acquisition Strategy

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Risk Handling Techniques Risk Handling Techniques In Acquisition StrategyIn Acquisition Strategy

• Competition• Maintaining competition as long as possible during program phases can lower risk

• Commerciality • Use of commercial products/services drives down schedule, cost, and performance

risks

• Contract incentives in cost-plus contracts

• Contract Types• Cost Reimbursable - more appropriate for technically risky programs• Firm Fixed Price - Ktr assumes risks

• Type of Source Selection• Lowest Price Tech Acceptable vs. Performance/Price Tradeoff vs. Full Trade Off

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Risk Handling Techniques Risk Handling Techniques In Acquisition StrategyIn Acquisition Strategy

• Market research • Vital tool to identify risk reducing opportunities

• Are requirements realistic?

• Ample competition? - Could affect contract type

• Have leaps & bounds in technology eliminated some risks?

• Get feedback through RFIs, draft RFPs, and Industry Days - Ask potential offerors to identify risks

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RFPDISCRIMINATORS

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RFP DiscriminatorsRFP Discriminators

• Source selection is a process of discrimination• All offerors come in on equal footing• If SS properly structured and conducted

• Offerors w/ superior ideas, excellent past performance, or low risk will rise to the top

• Offerors in over their heads, don’t understand the requirements, or inexperienced will drop to the bottom

• Offerors who are mediocre, will be in the middle

• Worst case - all offerors rated the same

High Risks = DiscriminatorsHigh Risks = Discriminators

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MitigationMitigation

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Evaluation CriteriaEvaluation Criteria

Section M, Subfactor 1.2 – Management Approach

This subfactor is met when the Offeror presents a Management Approach that meets all of the following criteria:

(a) Sound and realistic staffing plan that demonstrates Offeror’s capability (e.g., “reach back” capability, “network”, on contract, 3rd country personnel, etc.) to quickly provide worldwide on-site expertise within a maximum of seven calendar days for OCONUS requirements and 48 hours for CONUS requirements. (P4A) It is more advantageous to provide worldwide on-site expertise for OCONUS within 48 hours and CONUS within 24 hours. (S1C)

(b) Sound and realistic Quality Control Plan that ensures adequate quality, schedule, cost, and performance by providing sufficient oversight to effectively manage and integrate subcontractors (P7B) (P5B). The Plan shall also include processes to effectively identify and resolve problems. (P1C).

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SummarySummary

• All team members are a vital part of risk process

• Acquisition strategy should be driven by Risk• Risk assessment is critical to a successful Source

Selection, • i.e., selection of best contractor(s) to satisfy mission need • Not just a block to “check off”

• Evaluation criteria should originate from risk assessment and focus on discriminators

If you understand your risks – in most If you understand your risks – in most cases you can mitigate themcases you can mitigate them

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Additional InformationAdditional Information

• Acquisition Community Connection

https://acc.dau.mil/rm

• Training • AFIT

• SYS 165, Introduction to Risk Management• DAU

• DAU continuous learning center• Risk Management, CLM 017

• Access through URL above• On line• Not necessary to register for course– just browse

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Questions?

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Risk Management Plan (RMP)Risk Management Plan (RMP)

• No required format• Components of Risk Management Plan (RMP) from:

• Risk Mgmt Community of Practice (CoP)https://acc.dau.mil/simplify/ev.php?ID=3333_201&ID2=DO_TOPIC

• Introduction

• Program Summary

• Definitions

• Risk Mgmt Strategy and Approach

• Organization

• Risk Mgmt Process and Procedures

• Risk Planning, Assessment, Handling, and Monitoring

• Risk Mgmt Information System, Documentation, and Reports

URL has suggestions of what to include in each sectionURL has suggestions of what to include in each section

Documents

Every Airman a Force Multiplier