NATIONAL DEFENSE BUSINESS INSTITUTE PROPRIETARY INFORMATION
Should Cost Estimating Procedures
and Implementation Study, Phase II
Interim Program Review
Prepared for:
Mr. Rob Pollock (SAF/AECO)
November 28, 2012
Copyright © 2012 by University of Tennessee National Defense Business
This document has been prepared by NDBI under contract #FA7014-10-D-0012, Task Order 0002 for the United States Air Force.
It is based on, and may contain, U.S. Government information; release or disclosure of this document or information contained herein will be determined by the United States Air Force.
Should Cost Phase II Interim Program Review
Contents
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Bottom Line Up Front
Study Scope
Terms
Should Cost Process Explained
Resourcing and Governance
Recommendations
Study Delivery Plan
Appendix
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Should Cost Phase II Interim Program Review
Bottom Line Up Front
• Phase 1 - Complete May 12
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Phase 2 - This study
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Should cost analysis as negotiation tool > 40 years in defense acquisition
Variety of methods and means used for Should Cost estimate, deprive PMs of better buying
power (BBP) benefits
Standardized process provides means of capturing BBP opportunities
Demonstrates PMs can achieve should cost benefits through disciplined focus on direct and
indirect costs; potential efficiencies, government costs and strategic actions that enable BBP
Standardizing PM approach and process with organic resources simplifies achieving affordability
and cost savings
Placing Should Cost “ownership” within a Program Control Function will minimize induced
variance and provide long-term monitoring accuracy
Continuous Should Cost Estimating allows for clear view of program progress variation
NDBI outlined a should cost process and developed a practical guide for PMs
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Findings and recommendations were informed by previous case research
Formidable obstacles to uniform, successful implementation of Should Cost estimating
remain.
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Method, steps and resourcing described here aid Air Force acquisition community in attaining BBP
goals and improving return on investment
Should Cost Phase II IPR is a snapshot of the study project as of the time briefed and is not a
final product. The effort to date will benefit from and be informed by the views of the reviewers.
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Should Cost Phase II Interim Program Review
Study Scope
Develop a comprehensive Should Cost process for all levels of ACAT programs clearly
outlining and explaining intent, process, and detailed steps to take as well as
recommending personnel skill requirements crucial to achieve desired results.
(F-22 3.2b software Should Cost effort used as an exemplar)
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Focus on exploiting results from phase one
Develop process for implementing the In-Progress
Should Cost Estimating Process within PM’s
capability
Use traditional Air Force Should Cost estimating
methodology to provide an organizational and
streamlined procedure baseline
Tailor procedures to the level of program complexity
unique to the Acquisition Categories.
Build plan to implement findings and conclusions in
both the In-Progress Should Cost as well as the
traditional Should Cost estimates tailored to ACATs
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Should Cost Phase II Interim Program Review
Basic Terms
Will and Should Cost Terminology
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A transparent two-tiered cost, funding and
management approach using two separate
estimates
Will Cost Budget Baseline is a non-advocate
budget – similar to Independent Cost Estimate
- Parametrically derived
- Provides sufficient resources to execute the program
under normal conditions
- Average levels of technical, schedule and
program risk ( greater than 55-60% confidence)
- Sufficient funding to allow program completion without additional budgets
- Baseline for potential Nunn-McCurdy breaches
•
Should Cost Baseline estimates developed by the Program Office
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Used as an internal management tool to incentivize performance to targets
Based on realistic technical and schedule success oriented outcomes by implementing
efficiencies, lessons learned and best practices
Early should cost estimates drive affordability goals, later estimates identify cost savings
Designed to drive productivity improvements
Incorporates results of FAR/DFAR Should Cost review of direct and indirect costs
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Should Cost Phase II Interim Program Review
Should Cost Estimating Process Built On Prior Studies
Review findings and recommendations are informed by previous
National Defense Business Institute studies, such as...
Program Control (PC)
•
Strengthening the PC function would support Program
Managers (PMs) with integrating various analyses and provide
them the needed capability to make informed program decisions
and tradeoffs, allowing PMs to anticipate problems and take
appropriate steps early to find solutions
Acquisition Strategy for Contract Success
•
Provides government decision makers with a
repeatable documented formal process for
developing business relationships based on
current requirements at any acquisition phase
MDAP Lessons Learned
• Ensure decision makers have necessary
information and an adequate understanding of
implications to make quality decisions;
implement proven program control functions;
effectively track program performance, and
secure appropriate stakeholder expertise
Analysis of Indirect Costs
• Examines the effect of indirect rates on program costs
and challenge these rate “pools” pose to affordable
delivery and government buying power
And, more.......
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Should Cost Phase II Interim Program Review
Span Of Influence For Program Success
Macro
Congress
DoD/AT&L
SECAF
SAF/AQ/FM/Other
AFMC/ Center
Government
PEO
Micro
PM
Span of Influence
(Direct and Indirect costs)
Micro
Program
Leadership
Sector
Corporate and Overheads
Macro
Industry
Multiple Contractors
Air Force Wide Portfolio
DoD Wide Portfolio
Span of influence for both government and contractors establishes context for program success
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Should Cost Phase II Interim Program Review
Continuous Should Cost Estimating (SCE) Process
Should Cost
Enterprise
Capability
Survey
Should Cost
Implementation
and Monitoring
Develop
Courses of
Actions
Develop Macro
and Micro
Opportunities
Stratify
Options
Not Dependent on Milestone Events; Applies Continuously Throughout Program
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Should Cost Phase II Interim Program Review
Continuous SCE Process
Program office expertise and skill sets drive a successful Should Cost Event
Should Cost
Enterprise
Capability
Survey
Start with Will Cost
baseline
• Programs use
functional, domain
and process
expertise to identify
areas where value
can be achieved at
lower operating costs
while successfully
mitigating risks
• Early, on-going
collaboration
between
requirements and
program offices
results in more
credible Program of
Record Will Cost
Baseline
Develop
Micro and
Macro
Opportunities
PM’s develop target
areas of interest
• Initial alignment
across all
stakeholders on
program mission
and requirements
that can be reduced
• PM’s validate
requirements, and
funding based on
accurate cost
estimates
• SAF/AQ/FM input
improves ability to
resolve potential
issues
Stratify
PMs stratify options
consistent with
program scope,
balanced
requirements,
funding and
schedule
• Options are
considered that
modulate one or
more of the above
ensuring program
successfully
executes at Should
Cost estimate
• Independent reviews
provide program
office with added
perspective
Develop
Courses of
Action
PM’s develop
Should Cost skilled
positions and put
infrastructure in
place to execute;
nominally the
program team
responsible for
delivering the
Program of Record
• Benchmarking
between program
office and
contractor can
foster open
communication and
alignment on set of
prioritized issues
Should Cost
Implementation
and Ongoing
Monitoring
PMs ensure
Acquisition Strategy
Plans and Request
For Proposals enable
Should Cost savings
and implement
through their
program staffs, with
specialized
assistance secured
where needed.
• Should Costs are
negotiated and
contracts definitized
per the requirements
statement of the
program of record
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Should Cost Phase II Interim Program Review
Continuous Top Level SCE Process
Should Cost Estimate seeks to drive productivity improvements into programs
during contract negotiations and throughout program execution including
sustainment; providing value at lower cost.
The Process
Continuous Should Cost analyses enables PM to scrutinize all elements of government and
contractor costs and apply corrective measures to drive economic efficiencies
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Should Cost Phase II Interim Program Review
Top Level SCE Process Expanded
Basic Considerations:
• Should Cost events are conducted on
continuous basis as information becomes
available as well as in support of key decisions
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Stakeholder priorities and requirements have
major impact on Should Cost
The availability of data / knowledge and the skill
set of the estimating team determines the actual
estimating method used
The program characteristics such as size and
complexity of the program, determines the
estimate class defining level of effort and
consequently, the resources required to
effectively conduct a Should Cost analysis
Each Should Cost event can be treated as a
project with a beginning and end
Mirror the program acquisition and contract
definitizing efforts
Purpose for SCE
Determine SC Objectives
Program Characteristics
Determine Estimate Class
Stakeholders Input
Select Estimating Method
Determine Availability
of Resources
Acceptable Risk
Prioritized Elements
for Focus
Availability &
Validity of Data
Tailor Estimating Method
Document Method
Assumptions and
Ground Rules
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Should Cost Phase II Interim Program Review
SCE Process Methodology And Participants
A “multi-discipline roadmap” leverages organizations with specific, chartered
responsibility to help determine best values, efficiencies and opportunities to fully
inform and underpin the Should Cost Review (SCR)
Statute, Regulatory or Policy
Initiates
Identify Purpose for SCE
Existing Program
Reports
Stakeholders
Identify Program Characteristics
Acceptable Risk
Identify and Prioritize Elements
for Focus
Determine Availability
and Validity of Data
Determine SCE Ground Rules
and Assumptions
PBE or Annual
SCE Event
or Time
Driven?
Acquisition Event
Acquisition Event
H/W
S/W
Services
Determine SCE Structure
Personnel Skillsets
and Qualifications
Existing Databases
Identify Team and Funding
Identify SCE Monitoring and
Management
Tasks
Participants
Identify Closeout Actions & Plan
Existing Information
Program Control
Key Questions
Identify Report Generation Plan
Metrics
Tools
Structure
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Should Cost Phase II Interim Program Review
SCE Process Program Success Objectives Considerations
Challenge: Should cost estimating must address not only steady state, but what it
takes to achieve a lowest “could cost.”
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Recurring cycle with Will Cost establishing the program contractual
baseline; Should Cost better buying power affordability targets
Program undertakes defined initiatives to deliver value, affordability at
lower Total Obligated Amounts (TOA)
Initiatives comprised of direct, and indirect expense
– Direct = most controllable, such as direct labor
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– Indirect = less controllable, but sizable long-term savings can accrue to both
the Air Force, and contractor, such as certain overhead expenses
Portfolio management and strategic sourcing can exponentially increase
value at lower TOA, with corresponding contractor efficiency gains
improving global competitiveness
The program draws upon multifunctional resources to continuously
challenge cost growth and drive affordability
– Air Force driven program expenditures must receive equal scrutiny
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Should Cost Phase II Interim Program Review
SCE Process Key Programmatic PM Inquiries
Types of specific questions PMs must ask that drive cost:
Technical
Considerations;
Meeting
Warfighter
Needs
Program
Resourcing
Government
Initiatives
• Are the program requirements still valid?
• Is engineering trade space available?
• What technical aspects of the program appear to be driving costs?
• Do alternative technologies or processes exist?
• What are the potential savings?
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Is the program structured and resourced properly?
What changes to organization, processes, schedule are needed?
Is there a budget profile that would make the program more efficient?
What government activities, processes, or bureaucracy drive costs?
Are these actions necessary for program success or risk mitigation?
Can they be waived, modified, or eliminated?
Can modifications to the contract be made to help the contractor
improve efficiencies?
What data or deliverables are we requesting from the contractor?
What individual or organization uses these? Are they useful and
necessary?
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Should Cost Phase II Interim Program Review
Specific Steps To Achieve Contract Negotiation Advantage
Step 1: Use existing data
Step 4: Validate
analysis
Step 2: Develop predictive model
Step 5: Parametrically
Derived cost objectives
Step 3: Adopt appropriate
efficiency initiatives
Step 6: Negotiate
Step 7: Implementation
and metrics
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Should Cost Phase II Interim Program Review
Step One: Using Existing Data
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Use and rely on existing data sources to develop
composite assessment of program costs
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Program Contract Data Requirements List (CDRL) data to date
Senior leader presentations
Contractor presentations
Redacted (price) data from other programs
Leverage on-going efforts
– Independent Assessment where possible for broader perspective
• major areas of potential cost savings
• Deep-dive review of a couple initiatives
– Form a Government team; create dialog with the contractor
• major areas of potential cost savings
• DCMA/DCAA/Others to identify indirect rates and incentive range
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Should Cost Phase II Interim Program Review
Use And Integrate Existing Review Team Resources
DCMA/DCAA
Activities
• Overhead Reduction Initiatives
• Contract Surveillance Improvements
AF/LCMC “Center”
Level Activities
Specific Program
Activities
Contracting
(Program, SAF/AQ)
Activities
Hardware/Software
Production
• Center-wide Best Practice Efficiencies
• Contract Governance Efficiencies
• Cost Reduction Initiatives
• Will Cost/Should Cost Budget
Verification
• Government Position for Negotiations
• Cost Confidence for Target Ceiling and
Share Ratios
Leverage
existing
resources to
satisfy multiple
objectives
• Comprehensive system-build review
• Greater readiness and production
confidence
Use single Integrated should cost team to blend critical and existing skills;
saves time , provides focus and greater access to information
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Should Cost Phase II Interim Program Review
Step Two: Develop Predictive Model
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Develop predictive modeling method that accurately
recreates present program costs
– Factor analysis
– Rate analysis (DCAA, DCMA)
– Other government resource historical data
Using parametric estimating; make efficiency and other
adjustments in should-cost objective targets
– Comparison to program actuals
– Comparison to other government resource historical data
Contractor interface (desired) to validate; run, and re-run the
predictive model factoring in the should-cost objectives
– Contractor involvement important, but if not; not a “showstopper”
Develop parametric, objective based should cost
– Combine results from all analyses
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Should Cost Phase II Interim Program Review
Step Two: Develop Predictive Model (Cont.)
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Estimates are essentially a cost model of a process, system or object
Uncertainty and Sensitivity Analysis offer valid tools for characterizing
the uncertainty associated with an estimate
- Uncertainty analysis
quantifies the uncertainty in
the outcome of an estimate
- Sensitivity analysis has the
complementary role of
ordering by importance the
strength and relevance of
the inputs in determining
the variation in the output
Existing parametric models exist – should be using same model that the program finance support
office uses to ensure continuity of effort
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Should Cost Phase II Interim Program Review
Step Three: Adopt Appropriate Efficiency Initiatives
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Identify program management efficiencies; candidate elements for
cost reduction
System Engineering Program Management LOE
Airframe, Payload, Bus Assembly, Software development, Integration
& Test, functional labor support & schedule, and much more....
Major subcontracts (establish dollar value)
Long lead
Production
Resource loading
Contract terms and conditions
– CDRLS
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– Compliance efficiencies
Lean Manufacturing
Optimized and integrated production schedules (Lean Manufacturing)
Reduction in government expense (people, dollars and processes)
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Should Cost Phase II Interim Program Review
Step Three: Adopt Appropriate Efficiency Initiatives (Cont.)
Cost Driver
Direct
Program Management
Technology
development/substitution
Testing
Production
Plant Equipment
Costs sorted into direct or indirect
categories then further decomposed
into sub-categories
Categories and sub-categories are
compared against the MILSTD WBS
templates to ensure all types of cost
were adequately identified.
Labor
Utilities
Externalities
Exchange Rates
Indirect
X
Contract Type
X
X
Tech Maturity
X
X
Manufacturing Maturity
X
Funding Stability
X
X
Resource Availability
X
X
Test Methodology
X
Delivery Location
X
Required External Confidence
An Ishikawa
analysis used to
identify common
cost drivers for
each category
Common
cost drivers
for all
categories
identified
X
X
X
CONOPS & OPTEMPO
X
Hazardous Materials
X
Recoverable Resources
X
Production Interruptions
X
Requirements Maturity/Stability
X
X
Number of Reviews & Audits
X
X
Performance Risk
X
X
X
Contract Type Risk
X
Cost Efficiency
X
Admin
Capital Cost/ Facilities Capital
X
Security Level
X
Competition
X
FCCM
B&P
IR&D
Facilities
Profit or fee
Pensions and Benefits
X
RAM
Program Oversight
Engineering support
Direct
X
Production/Deployment Rate
Deployment
Disposal
Indirect
Program Complexity
X
Table 3: Common Cost Drivers
Should Cost uses the common
cost drivers and historical
information to inform the effort in
order to concentrate on the most
likely areas to maximize ROI
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Should Cost Phase II Interim Program Review
Step Three: Adopt Appropriate Efficiency Initiatives (Cont.)
Program’s feasibility assessment....one of dozens of methods
Easy to Implement
Hard to Implement
Large
Payoff
Challenge
Nearly Impossible
(Really Tough)
Small
Payoff
Possible
Kill
Content
(Scope
Or
Practice)
Time
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Should Cost Phase II Interim Program Review
Step Three: Adopt Appropriate Efficiency Initiatives (Cont.)
Program Manager Identified Cost Drivers
Type of Estimate will be Based on Fidelity
Required
Hardware,
Software or
Service Cost
Drivers
Cost Drivers/Cost Issues
Identify – Current Projected
Cost, Corrective Action,
Implementation Timeframe
and potential savings
Template can be automated and be used to identify most likely estimating method or populating
common cost drivers from past programs under each cost category
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Should Cost Phase II Interim Program Review
Step Three: Adopt Appropriate Efficiency Initiatives (Cont.)
•
Intersect of Macro and Micro Opportunities....what
the program can reasonably pursue
SCE
LCMC
Selected
by the
program to
pursue
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Should Cost Phase II Interim Program Review
Step Four: Validate Analysis
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Where data gaps exists, use comparable analysis with other
government programs of similar scope and complexity
Methods to bridge gap analysis:
– Challenge basis for indirect costs
– Benchmark similar programs; the government to leverage its
purchasing power
– Supply chain management challenges
– Target pass-through and burdens on non-touch costs
– Cost modeling
Obtain appropriate available data from other government
acquisition programs (benchmarking)
– Efficiency comparison
– Resource pooling
– Procurement bundling and strategic sourcing
Connect and tie to Production Readiness Review (PRR), or
similar decision-event
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Should Cost Phase II Interim Program Review
Step Five: Parametric Cost Analysis
Specific objectives are identified and traceable to new, total cost
Specific objectives
expressed
and
linked objectives. As actual costs
Parametric cost analysis valuable
for establishing
affordability
become available subsequentfinal
cost savings
price will depend more on actual program costs.
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Should Cost Phase II Interim Program Review
Step Six: Negotiations Based On Should Cost Estimates
Opportunities and
negotiations objectives
expressed in terms of:
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•
Near-term (within the
current PM’s tenure) and
long-term initiatives
Program driven (within
the PM’s authority)
illustrative
Service Driven (within
Service SAE and
secretary control)
Externally driven
(outside the PM or
Service control)
Source: Implementing Will-Cost & Should-Cost Management, 16 Feb
2011, R. Davies, Dir PM&AE, and R. Woods, Technical Dir AFCAA
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Should Cost Phase II Interim Program Review
Step Seven: Implementation Of Negotiated Baseline
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Negotiated changes to the contract value are reported in
recurring status reports
Anticipated changes are closely monitored by appropriate
means, such as future overhead reductions
Emphasis is on execution
and system delivery
Maintain close relationship
with functional
organizations, including
externals, such as audit
Independent assessments,
benchmarking and metrics
can provide valuable insight
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Should Cost Phase II Interim Program Review
Resourcing Competent Program Management Staff
•
Team number and
composition impacts
level of inquiry
Immediate SCR
Team Composition
Medium
Medium
Small Team Team (8
Team
(4 direct
direct
(12 direct
mbrs)
mbrs)
mbrs)
Rationale
Team composition
includes individuals with
requisite program management, engineering,
acquisition and contracting specialties. These
members rely upon and integrate more detailed
products generated by those with Federal
Acquisition Regulation (FAR) charter
responsibilities.
Major Subcontracts
•
Opportunity areas
scaled to available
resources/time
Teaming
Interdivisional Work Transfers
(IWT's)
Long lead
Obsolescence
workload resourcing
Production
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illustrative
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Non-Recurring Engineering (NRE)
●
Payload assembly, integration and
test
Resource
Loading
Engineering
and other Level of
Rates (overhead and other)
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Emphasis on elements no longer required under
a production approach (both technical and
programmatic)
See roll on/off planning, below
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Expectation NRE is precluded in production
mode
Emphasis on elements no longer required under
a production approach (programmatic)
Emphasis on elements no longer required under
a production approach (technical and
programmatic)
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Emphasis on factors and loading
Emphasis on proportions
Emphasis on timing
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Special focus on Section H clauses
Review of alternate methods
Limited to desk top validation and present rates
published on LM's disclosure statement
●
Program Mgt level of effort
effort
Allocation/sharing
Roll-on/Roll-off planning
Government oversight
Contract type, terms and
conditions
Financing
Consisting primarily with Northrop Grumman
(NG)
Work accomplished by Lockheed Martin
affiliates
●
●
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Should Cost Phase II Interim Program Review
Resourcing Program Experience And Crucial Skills
Members
#
Organization
Responsibilities
Team lead
1
Program office
Leadership
Technical
3
Program
Engineering staffing (LOE), deliverables (CDRLS),
reports and analyses, program reviews, technical
interchange meetings and test reductions, Earned
Value Management (EVM), quality assurance and
production
illustrative
Business and contracts
2
Program and Center
PK
Rates and factors, contract requirements and
subcontract flow downs, EVM (shared with Technical),
and all materials (both strategic sourcing as well as
component delivery)
Cost
2
Program
Prime and subcontract pricing
DCMA and DCAA
1
DCMA/DCAA @ .5
each
Corporate overhead, rates and factors, escalations and
all issues affecting the corporate disclosure statement
Administrative and
logistics
1
Program
Scheduling all reviews, materials preparation,
coordination and access requirements
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Should Cost Phase II Interim Program Review
Governance
Governance needed to manage multiple expectations, provide status to
leadership, minimize speculation and error, and efficiently lead should cost effort
•
•
•
Frequent communication with entire team
Focus on cost drivers (Use Pareto 80/20 rule)
Reliance on
– Advisors
– DCMA (DACO and Plant Reps) and DCAA
– Business process teams (Contracts, Business Systems including EVM)
•
•
Involving the industry partners, if at all possible
Manage prime contractor expectations to avoid mis-communication
and speculation
Aggressive governance has potential to apply leadership to reduce wasted effort by eliminating
redundant reviews and reports – can drive efficient level of effort.
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Should Cost Phase II Interim Program Review
SCE Managed In Program Control Function
Estimating
•
•
•
Creates and validates
cost and schedule
estimates
Maintains a current
cost estimate and
documents reasons for
changes to estimates
as they occur
Runs sensitivity
analyses and predicts
results given program
changes
Budgeting
•
•
•
•
Analyzing &
Reporting



Compares program
status to plans,
budgets, estimates,
and schedules
Evaluates progress
and determines the
reasons for variations
Prepares acquisition
reports (e.g. MAR,
DAES, SAR, etc.)
Prepares budget
submission; submits
forecasts for obligating
funds
Tracks allotted funds
maintains Program
Office’s financial
records
Proposes financial
strategy; develops
financial plans
Helps with Scheduling
Scheduling
•
•
•
Determines schedules
to fit program needs
and constraints
Tracks progress
against schedules,
reports deviations
from plan, and
evaluates the impact
of possible solutions
Interacts with
budgeting function
Forecasting



Determines probabilities 
associated with the
occurrence of predicted
events
Identifies potential
problems and their impact
Evaluates and
recommends alternative 
courses of action to
program managers


Integrates, reviews,
and maintains all
budget plans and
schedules
Assists the program
manager in initial
program formulation
and staffing




Requirements
Control
Tracks status of
program requirements,
evaluates impact of
requirements changes
and updates budget
plans and schedules
accordingly
Prevents/mitigates
‘requirement creep’
Configuration
Management
Planning
Identifies and
documents the
functional and physical
characteristics of a
configuration item
Requires rigorous
systems engineering
Controls changes to
those characteristics
Records and reports
changes to processing
and implementation
status
Recording/
Archiving

Documents significant
actions and decisions
affecting the
anticipated outcome of
the program
Data
Management

Governs and controls
the selection,
preparation,
acquisition, and use of
data from contractors
Recommend implementation of SCE be established within a program control function where
competency to provide continuous, accurate and useful SCEs should be resident and within
the PM’s management purview
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Should Cost Phase II Interim Program Review
Should Cost Estimating Managed In Program Control Function
With
Program Control in Charge
Without
Program Control Influence

Task of integrating various analyses
often falls solely to the program
manager

Execution of program control function
varies greatly from program to program

High quality analyses are not
consistently conducted

Data is often merely “reported”, rather
than used as a management tool

Number of acquisition personnel with
sufficient skill and experience in
program control is diminishing

PM is provided with quality, integrated
program control analyses that allows
them to make informed program
decisions and tradeoffs

Program control is an integral function
within Air Force acquisition, with
clearly defined roles, responsibilities,
and accountability

A high performing program control
function allows program managers to
anticipate problems, evaluate data,
and mitigate risks

A strong pipeline of talent can
effectively grow program control
Findings from complementary studies indicate program control is a key element that can drive
the entire Should Cost cycle for the Program Manager
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Should Cost Phase II Interim Program Review
Summary
Pursuit of lower cost, higher value acquisition solutions are here to stay....
•
•
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Should Cost is relevant for all Air Force programs, irrespective of ACAT, and can
improve return on investment and achieve affordability goals
Early and frequent engagement and integration of financial management and
contracting support critical to success
A disciplined process and specific, sequential steps will aid in developing
rigorous, sound estimates
Achieving Should Cost values mirrors and relies on the acquisition system;
basic contracting procedures apply
Long-term monitoring is needed to ensure the program remains on the “glide
slope” to achieving intended efficiencies and cost targets
Efficiencies will be measured by affordability goals met and cost savings
achieved
Recommend program control function be established in every ACAT program
and recurring should cost and ancillary acquisition training to develop and
improve workforce skillsets
A continuous should cost estimating process is a critical program management tool that keeps
program managers informed better buying power achieved
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Should Cost Phase II Interim Program Review
Study Delivery Plan
Today
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Should Cost Phase II Interim Program Review
Questions
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Backup
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Should Cost Phase II Interim Program Review
Appendix - Acronyms
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SCP – AFCAIG: Service Cost Position – Air Force Cost Analysis Independent Group
NACA: None Advocate Cost Analysis
ICE (CAPE): Independent Cost Estimate (Cost assessment Program Evaluation)
MS Updates WC: Milestone Updates Will Cost
Annual WC Updates: Annual Will Cost Updates
CARD: Cost Analysis Requirements Description
Should Cost (POE): Should Cost Program Office Estimate
Contract T & C’s: Contract Terms and Conditions
CDRL: Contract Data Requirement List
PPBE: Program Planning Budget Execution
POM: Program Objective Memorandum
AoA: Analysis of Alternatives
FFRDC: Federally Funded Research & Development Centers
DCMA: Defense Contract Management Agency
DCAA: Defense Contract Audit Agency
CE: Cost Estimate
KTR: Contractor
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Should Cost Phase II Interim Program Review
Appendix – ACAT Templates
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Should Cost Phase II Interim Program Review
Appendix – ACAT Templates (Cont.)
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Should Cost Phase II Interim Program Review
Appendix – ACAT Templates (Cont.)
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Should Cost Phase II Interim Program Review
Appendix – Program SCE Implementation Landscape
Air Force Will Cost/Should Cost—ACAT I, II, III Programs
User Needs
Technology Opportunities & Resources
Milestone Reviews
A
Materiel
Solution
Analysis
Initial SCE
Major SCE
Technology Readiness Assessment
Minor SCE
Decision Point
Program Reviews
B
C
Engineering and
Manufacturing
Development
Technology
Development
Material Development
Production and
Deployment
Post- PDR A Post- CDR A
Operations and
Support
FRP –Decision Review
Program Reviews
IBR
(with a technical basis)
Technical
Reviews
ITR
ASR
IBR TRA IBR
SRR
SFR PDR
TRA IBR OTRR
CDR TRR SVR/FCA/PRR
PCA ISR
iSCEs
Annual iSCEs as Required
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