Delivering Cost Data to the MoD to Support Business Cases

1. Delivering Cost Data to the MoD to Support Business Cases Paul Duvall Deputy Team Manager HVR Practice – Through Life Cost Modelling Association of Cost Engineers 3 Nov 09

2. Contents slide • 1 Process and Requirements • 2 Modelling Examples

3. 1Process and Requirements

4. SME Cost Assessments • Supplier Cost Data • Equipment Reliability Data • DLOD Base Assumption • SME Risk Assessments MDAL (Master Document Assumptions List) Risk Register Whole Life Cost Model (Deterministic) £ Probabilistic Risk Model £ £ £ £ Whole Life Cost Model (Probabilistic) Captures Risk Captures Uncertainty Provides 10, 50, 90% Confidence Figures Generic Process?

5. Risk Modelling Terminology

6. Measuring Confidence/Optimism Bias

7. CMTL • Allocation of Cost • Input • Defence Lines of Development • TEPIDOIL (I) • Training, Equipment, Personnel, Infrastructure, (Concepts &) Doctrine, Organisation, Information, Logistics………………… (Interoperability). • Cost Resource Breakdown Structure (CRBS) • PBS/WBS/BOM etc • Output • Budget Holder • EPP/ESP • RDEL/CDEL • TLF • Procurement, Upkeep, Update, Upgrade, Capital Spares, Fuels, Other Costs

8. Current Issues • Allocation of Uncertainty • Use of Global Uncertainty Factors • Impact: • uncertainty applied across ALL elements of model • Does not reflect increasing uncertainty as estimate extends into the future • Identification of Uncertainty • Annualised or Totals? • Allocation of Risk • Foreign Exchange Risk • Correlation?

9. Global Uncertainty

10. 2Modelling Examples

11. Concept Demonstration Assessment Manufacture In-Service Disposal Cost Requirement Earned value Measurement Whole Life Costs Cost of Ownership Trade Studies Support Strategies Costing Requirements BOI Studies Cost of Ownership Trade Studies Options Analysis Affordability Analysis Risk Assessment Costing Requirement Earned Value Measurement Cost of Ownership Upkeep Strategies Costing Requirements BOI Studies Cost of Ownership Trade Studies Options Analysis Strategies Risk Assessment MG Cost Forecasting Tools FACET OSCAM EVM tools Portfolio Bespoke WLF models CRBS, DLODS IG Cost Forecasting Tools FACET OSCAM Portfolio Bespoke WLF models CRBS, DLODS Cost Forecasting Tools OSCAM Portfolio Through Life Costing Capability (Case Study) FACET

12. Concept Phase - Exemplar • Exemplar: Assessment of Options for Auxiliary Warship • Family of Advanced Cost Estimating Tool (FACET) used to generate the acquisition cost for the development and manufacture of 6 ships. • Using the established performance criteria key Design inputs were identified and agreed. • Excursions: • reduced displacement • smaller helicopter or fewer larger helicopters • fewer (vertical) replenishment points

13. 1078 1220 940 753 1027 1166 1310 838 1114 1254 1400 923 Through Life Costing Capability (Concept) FACET provides the capability of generating iterations against variations in performance and design rapidly Programme cost (2009 prices) Budget £1100 m Iteration 1 Iteration 2 Budget Iteration 3 Budget Line clearly indicates the difficulty of procuring 6 Auxiliary warships to meet the original KURs Iteration 4 £900M £1100M £1200M £800M £1000M £0M £500M £700M £1400M £1300M

14. Historic Trend Analysis - FACET

15. In-Service Phase Exemplar OSCAM - Operational Support Cost Analysis Model Can provide detailed analysis of support costs Can provide rapid cost assessment Can show effect of running options and allows comparison

16. In-Service Cost Option Analysis • Running Options (Exemplar) • Baseline: aircraft maintenance based on three lines of maintenance • Excursion: actions previously handled by the intermediate level are split between Govt (Organic) and Contractor Depots