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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
PRT#115 22 February 2012 Approved for Public Release 2
Background
Modeling Techniques
Summary
Outline/Agenda
2
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
PRT#115 22 February 2012 Approved for Public Release
Our Reality is an Integrated System; Where Budget Availability is a Major Input
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
DETERMINISTIC ANALYSISModeling the Effect of Budget Constraints on Cost and Schedule
6
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)
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
COST RISK ANALYSISModeling the Effect of Budget Constraints on Cost and Schedule
15
PRT#115 22 February 2012 Approved for Public Release
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
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?
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
General Approach for Three Different Scenarios
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
-$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?
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
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
PRT#115 22 February 2012 Approved for Public Release
INTEGRATED COST AND SCHEDULE RISK ANALYSIS
Modeling the Effect of Budget Constraints on Cost and Schedule
25
PRT#115 22 February 2012 Approved for Public Release
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)
26
PRT#115 22 February 2012 Approved for Public Release
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
27
PRT#115 22 February 2012 Approved for Public Release
Modeling Approach – Enabling via Budget Organization Levels
28
PRT#115 22 February 2012 Approved for Public Release
Example Simple Project Model(5 Budget Organization Items)
Budget
Effort/Costs
Schedule
29
PRT#115 22 February 2012 Approved for Public Release
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
30
PRT#115 22 February 2012 Approved for Public Release
SUMMARYModeling the Effect of Budget Constraints on Cost and Schedule
31
PRT#115 22 February 2012 Approved for Public Release
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
32
Summary
ReqtsTechnical
ScopeWork Plan
Effort Size
Budget
Duration
Cost
PRT#115 22 February 2012 Approved for Public Release 33
Thank You