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PRT#115 22 February 2012 Approved for Public Release Los Angeles Washington, D.C. Boston Chantilly Huntsville Dayton Santa Barbara erque Colorado Springs Goddard Space Flight Center Johnson Space Center Ogden Patuxent River Washington N Ft. Meade Ft. Monmouth Dahlgren Quantico Cleveland Montgomery Silver Spring San Diego Tampa Taco Aberdeen Oklahoma City Eglin AFB San Antonio New Orleans Denver Vandenberg AFB Modeling the Effect of Budget Constraints on Cost and Schedule NASA 2012 PM Challenge Darren Elliott – Tecolote Research, Inc. 22 February 2012

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Page 1: Backup darren elliott

PRT#115 22 February 2012 Approved for Public Release

Los Angeles Washington, D.C. Boston Chantilly Huntsville Dayton Santa Barbara

Albuquerque Colorado Springs Goddard Space Flight Center Johnson Space Center Ogden Patuxent River Washington Navy Yard

Ft. Meade Ft. Monmouth Dahlgren Quantico Cleveland Montgomery Silver Spring San Diego Tampa Tacoma

Aberdeen Oklahoma City Eglin AFB San Antonio New Orleans Denver Vandenberg AFB

Modeling the Effect of Budget Constraints on Cost and Schedule

NASA 2012 PM Challenge

Darren Elliott – Tecolote Research, Inc.22 February 2012

Modeling the Effect of Budget Constraints on Cost and Schedule

NASA 2012 PM Challenge

Darren Elliott – Tecolote Research, Inc.22 February 2012

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PRT#115 22 February 2012 Approved for Public Release 2

Background

Modeling Techniques

Summary

Outline/Agenda

2

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PRT#115 22 February 2012 Approved for Public Release

Implementation of cost risk analysis to provide a better gauge of the most likely required effort for a project

NASA established policy to fund at a target cost confidence level Reality was that cost risk funds exceeded targeted budget levels Led to additional analysis on best techniques for applying reserve and setting up the overall

project budget

Recognition that enhanced modeling was needed, as many costs are time-dependent (e.g., fixed infrastructure, program support, systems engineering) in nature

Developed methods to address costs based on time behavior (e.g., time-dependent and time-independent)

Enhanced understanding hat additional costs are incurred due to schedule delays associated with alignment of work packages

Developed methodology to integrate cost and schedule risk analysis to determine the joint confidence level (percent chance of meeting both cost and schedule objectives)

NASA established policy to fund projects at a target joint confidence level

Realization that funding is a major driver to schedule and total cost Lack of budget availability stretches schedule Currently researching and developing methods to address this problem

3

Evolution of Cost/Schedule Understanding

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Our Reality is an Integrated System; Where Budget Availability is a Major Input

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Tool 1: Deterministic Based Approach Sponsored by NASA JSC , developed by Tecolote Research, Inc Requires identification of major cost elements, breakdown into TD/TI behavior, and notional

understanding of dependency (serial or parallel) between cost elements Uses time-phased cost and budget information Runs in Excel

Tool 2: Cost Risk Based Approach Sponsored by NASA HQ, developed by Tecolote Research, Inc Requires development of a cost-risk analysis Uses cost risk statistics, and time-phased cost and budget information Runs in ACE or Excel

Tool 3: Integrated Cost and Schedule Risk Analysis Approach Sponsored by NASA JSC and NASA HQ , developed by Tecolote Research, Inc Requires development of an integrated cost and schedule risk analysis, allocation of costs to

schedule effort, and breakdown of cost into TD/TI behavior Uses schedule logic, cost allocation to schedule activities, time-phasing of costs, cost and/or

schedule statistics, allocation of schedule/cost effort into budget items, time-phased budget information, and can incorporate discrete threats

Runs in Excel /Crystal Ball

5

Several Tools Have Recently Been Developed to Assess Impact of Funding Constraints

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PRT#115 22 February 2012 Approved for Public Release

DETERMINISTIC ANALYSISModeling the Effect of Budget Constraints on Cost and Schedule

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PRT#115 22 February 2012 Approved for Public Release

Deterministic Analysis Model

Purpose: Provide program managers and resource analysts the ability to assess the effect that budget constraints will have on a program Requires a simple set of data Includes estimated effect on both cost and schedule

Allows for rapid simulation and comparison of different scenarios

Requires cost plan for major activities/efforts and a notional understanding of major effort dependencies (e.g., serial or parallel activities)

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Model Overview

The model attaches Time-Independent (TI) and Time-Dependent (TD) costs to schedule elements TI cost elements: Total cost is constant regardless of duration TD cost elements: Total cost increases as duration increases (labor

rate and resources)

Budget constraints reduce spending and cause the associated schedule elements to extend Assumes a constant spend rate within each fiscal year The spend rate is determined from the year’s constraint TD spend rates are considered fixed, while TI spend rates are

allowed to vary to fit within the constraint

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Model Overview

Schedule Elements

Cost Elements

Budget Constraint

s

Schedule Element Referenc

e

User Interface

Analyze

Budget Constraint

Engine

Named Excursion Results

Results Display Engine

Show

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PRT#115 22 February 2012 Approved for Public Release

Example Analysis: Baseline Case

Four budget elements, includes series and parallel events

• Each task has an associated TI and TD cost, resulting in the following spending profile:

10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016

Task 1

Task 2

Task 3

Task 4

Date

Summary Results Gantt Chart

Start Date Finish DateTask 1 10/1/2012 2/13/2016Task 2 4/1/2013 1/25/2014Task 3 1/26/2014 6/18/2015Task 4 1/26/2014 11/25/2015

This example assumed up to $200 was available per year, as demonstrated by the black line

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016 2017 2018

$M

Summary Results by Schedule Elements (Constant Year $)

Task 4

Task 3

Task 2

Task 1

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Example Analysis: Excursion 1

• What if the budgets are constrained by 10% each year?– Because tasks will now begin slipping, it is also necessary to define constraints

in the out-years beyond 2016, this example assumes funding continues at 2016 levels ($180 in this example)

10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017

Task 1

Task 2

Task 3

Task 4

Date

Summary Results Gantt Chart

10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017

Task 1

Task 2

Task 3

Task 4

Date

Summary Results Gantt Chart - Original Budget

311 day slip from baseline

0

20

40

60

80

100

120

140

160

180

200

2011 2012 2013 2014 2015 2016 2017 2018 2019

$M

Summary Results by Schedule Elements (Then Year $)

Task 4

Task 3

Task 2

Task 1

Original Duration Excursion Duration Original Cost Excursion CostTask 1 1230 1541 $402.64 $453.18Task 2 299 356 $69.35 $72.70Task 3 508 666 $57.99 $63.28Task 4 668 874 $144.35 $170.78

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Example Analysis: Comparison

Excursion has a 12% increase in cost

All excursion tasks have an increased duration Task 1 has the largest increase in duration Increases in duration correspond to increased TD costs

Constraining the budget will avoid cost in those years, but the deferred work and presence of fixed costs will result in a net cost increase and schedule slip

How can this information be used? Some examples: It is apparent Task 1 is a large cost driver in the new case, prioritizing it at the

expense of the other, shorter, tasks may result in a total cost savings If the goal is a budget reduction, it may be preferable to focus the reduction on only

one or two years instead of spreading it evenly

These different scenarios can be run to explore the nature of the budget constraint

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Example Analysis: Excursion 2

Prioritizing Task 1 allows it to finish earlier, and moves the entire project back to the left

10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017

Task 1

Task 2

Task 3

Task 4

Date

Summary Results Gantt Chart

• Final cost in this case: $708– Final cost in Excursion 1: $760– Final cost in Baseline: $674

0

20

40

60

80

100

120

140

160

2011 2012 2013 2014 2015 2016 2017 2018

$M

Summary Results by Schedule Elements (Constant Year $)

Task 1

Task 2

Task 3

Task 4

Excursion 1 Finish Date

Baseline Finish Date

• Task 1’s earlier completion frees up money for Tasks 3 and 4

This is an example of how the tool can be used to potentially optimize cost and schedule within a budget constraint

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Example Analysis: Excursion 3

What if some of the budget cuts can be reallocated?

In this example, we will cause FY2013 to take most of the budget cuts, but then increase the budget in the out-years:

2013 2014 2015 2016 2017$100.00 $200.00 $200.00 $200.00 $200.00

• This example finishes at nearly the same time as the original excursion– Total cost reduced to $743, compared to the excursion 1’s $760

10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017

Task 1

Task 2

Task 3

Task 4

Date

Summary Results Gantt Chart

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COST RISK ANALYSISModeling the Effect of Budget Constraints on Cost and Schedule

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Current Techniques to Align Cost and Schedule via Uncertainty Analysis

Technical Parameters

CERs

ID Task Name

41 SRR42 Design, Fab. Dev. Test…43 CDR44 Dev. Qual. Unit Fab.45 Dev. Qual. Test and Modification46 Qual. Test Facility (SSC B2) Available47 DCR48 Flight Unit 1-4 Prod.49 Flight Unit 2-4 Prod.50 Flight Unit 3-4 Prod.51 Flight Unit 4 Prod.

4/1

10/9

9/15

11/30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Schedule Schedule Uncertainty Analysis

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

24 Mar 2012 24 Dec 2012 24 Sep 2013 24 Jun 2014 24 Mar 2015 24 Dec 2015

Prob

abili

ty (H

isto

gram

)

Confi

denc

e Le

vel (

CDF)

Project Finish Date

Probability Histogram Confidence Level (CDF)

Cost Uncertainty Analysis

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

$75 $215 $356 $497 $638 $778 $919 $1,060 $1,201 $1,341

Prob

abili

ty (

His

togr

am)

Confi

denc

e Le

vel (

CDF)

BY2010 $MTotal - Cost Estimate Uncertainty Analysis Results

Probability Histogram Confidence Level (CDF)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TY $

M

Time Phased - Risk Adjusted Estimate

Allocated Dollars for 70% CL

Point Estimate

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PRT#115 22 February 2012 Approved for Public Release

However, Budget Profiles Rarely Match Risk-Adjusted Time-Phased Estimates

Annual budget sufficient to cover estimated point estimate effort

Shortfall in funding 70% effort for years 2007-2011

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TY $

M

Allocated Dollars for 70% CLPoint EstimateProject Budget

Shortfall

How Does Shortfall Impact Project?How Does Shortfall Impact Project?

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The Concept

Tecolote Developed a ROM-level analysis technique for NASA to gauge the impact of budget availability on a project’s target cost confidence level

The Technique requires: Risk adjusted, time-phased cost estimate Annual budget information User input on how to address multiple items (e.g., penalties, etc)

The General Approach Compare estimated effort (i.e., point estimate, risk adjusted time

phased results, or annual risk iteration results) to available budget Identify and track budget shortfalls Rollover unfunded effort, with associated inflation and productivity

penalties, to future years Apply logic to use available budget to fund rollover effort

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General Approach for Three Different Scenarios

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User Inputs and Controls

The user has the ability to: Select type of analysis to

conduct Point estimate Risk-adjusted (e.g., 70%) cost

estimate Dynamic assessment of

confidence level results Specify budget scenarios

Extend budget at peak Infuse/Reduce funds in specific

year Allow budget carryover Incorporate penalties for rollover

effort: Inflation considerations Productivity loss

Advanced Considerations Incorporating fixed costs (LOE) into

consideration Conducting portfolio analysis

Outputs Initial phasing result for Target CL Constrained phasing result Additional years of funding required

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Example Case – 70% Effort Exceeds Available Budget

Phased budget and point estimate

Cost risk analysis data (TY$M)

Cost estimate @ 70% confidence level

TY$M FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Total

Budget $25 $55 $65 $80 $70 $60 $30 $15 $400

Cost $21.8 $51.9 $63.6 $62.4 $52.9 $37.8 $18.9 $1.8 $311

Point Estimate

Confidence Level

MeanStandard Deviation

CV

$311 42% $372 $168 0.45

TY$M FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Total

70% CLE $29.8 $71.2 $87.1 $85.6 $72.4 $51.7 $25.9 $2.5 $426

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

$75 $216 $357 $499 $640 $781 $922 $1,063 $1,205 $1,346

Prob

abili

ty (

His

togr

am)

Confi

denc

e Le

vel (

CDF)

TY $MCost Estimate Uncertainty Analysis Results

Probability Histogram Confidence Level (CDF)

Budget Shortfall to Fund 70% CLEBudget Shortfall to Fund 70% CLE

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-$25

-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

2007 2008 2009 2010 2011 2012 2013 2014

Ann

ual S

urpl

us /

Sho

rtfal

l -TY

$M

Budget vs Pt Estimate - Surplus/Shortfall

$89M Budget Surplus -Funds Available For Reserve Utilization

Understanding the Shortfall – Work Slips to the Right

Budget exceeds phased point estimate in every year

Limited surplus in early years

At first glance seems that enough reserves are available for program

Total Budget inadequate to fund 70% CLE

Large shortfall in early years, if funds cannot be obtained, effort will slip into future periods 2007 work

slips to 2008 and so on…

Extended work carries penalties Inflation Productivity-$25

-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

2007 2008 2009 2010 2011 2012 2013 2014

Ann

ual S

urpl

us /

Sho

rtfal

l -TY

$M

Budget vs 70% Risk-Adjusted Estimate - Surplus/Shortfall

$26M Total Shortfall

$50M of work effortcannot be done in2007-2011

What are Possible Budget Scenarios? What are Possible Budget Scenarios?

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Identifying Budget Scenarios

Budget Scenario Considerations Need to be realistic

Near-term funds are difficult to obtain Annual increase must match capability to ramp up staffing levels and should track

to required work Should not have extreme changes year-to-year Difficult to increase beyond peak spending year

Cannot upset overall portfolio needs

Potential Options Identify infusion of funds into specific years Extend funding beyond peak funding year at or near peak value

$0.000

$10.000

$20.000

$30.000

$40.000

$50.000

$60.000

$70.000

$80.000

$90.000

$100.000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Project Budget

Budget Extension at Peak

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1. Initial Conditions indicate budget inadequate to fund 70% CLE

2. Project funded to budget value

3. Budget scenario created to extend budget at peak value and 70% time-phased estimate funded to extended budget values

4. Impact of rollover effort funded in out-years

Example Case Results – Effort Rollover Fits Under Budget Constraint

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

70% Risk Adjusted Estimate

Point Estimate

Project Budget

1

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

70% Risk Adjusted Estimate

Budget Funded Effort

Project Budget

2

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

70% Risk Adjusted Estimate

Budget Funded Effort

Extended Budget

3

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

RolloverEffort

Budget Funded Effort

70% Risk Adjusted Estimate

Extended Budget

4

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INTEGRATED COST AND SCHEDULE RISK ANALYSIS

Modeling the Effect of Budget Constraints on Cost and Schedule

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Integrated Cost/Schedule Budget Constrained Reserve Phasing Model

A tool is needed that accurately models the relationships between the work to be done, the annual budget available, and the overall cost and finish date of a project

Tool can be used to determine appropriate annual budgets and reserve strategies to meet the Joint Confidence Level requirement

The tool is called Budget-Constrained Reserve Phase (BCRPhase)

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High - Level Model Concept

Schedule Activities from JCL Models (or Project Schedules) are Mapped into Budget Organizations (Groupings)

Links Between Budget Organizations are Identified

Costs from JCL Models (or Projects Costs/Budget) are Mapped into Behavior Buckets within Budget Organizations

Cost Distributions Obtained from JCL Models (or other Analytical Methods) are Defined for Each Element

Discrete Risks from JCL Models (or Project Risk Lists) are Specified

Annual Values are Identified for Each Budget Organization

Monte Carlo Simulations are Generated to Determine Effort, Work is Adjusted to Fit Effort within Budget Level

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Modeling Approach – Enabling via Budget Organization Levels

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Example Simple Project Model(5 Budget Organization Items)

Budget

Effort/Costs

Schedule

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Organization 1

Organization 2

Time-Driving Costs Driven By Schedule Slip MilestoneLevel Of Effort Costs Schedule Dependency

Time-Driving Costs (Touch Labor, Materials, etc.) Schedule Activity

Time

Model in Action – What Happens When Effort Exceeds Budget Availability

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SUMMARYModeling the Effect of Budget Constraints on Cost and Schedule

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Understanding connection between cost and schedule is of utmost importance for estimators

Available funds and resources are major items that directly impact overall project schedule and end costs

Tools have been developed and research is continuing to help us assess this intricate system

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Summary

ReqtsTechnical

ScopeWork Plan

Effort Size

Budget

Duration

Cost

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Thank You