Systems Life Cycle Cost Considerations Applied to Stability and Reconstruction Operations John V. Farr, Ph.D., P.E. Professor of Engineering Management and Director of the Center for Nation Reconstruction and Capacity Development Department of Systems Engineering United States Military Academy at West Point West Point, NY 10996-1779 Office: (845) 938-5206 Cell: (845) 667-9573 Email: John.Farr@usma.edu or john.vail.farr@gmail.com Slide No. 1 of 30 3/1/12
Agenda • Introduction • The Classical Systems Challenges • Stability and Reconstruction • Life Cycle Considerations • Summary Slide No. 2 of 30 3/1/12
Mission Statement The mission for the Center for Nation Reconstruction and Capacity Development is to take an interdisciplinary and systems approach in facilitating and focusing research, professional practice, training, and information dissemination in the planning, execution, and assessment of efforts to construct infrastructure, policies, and competencies mainly in support of building partner capacity for communities and nations primarily in developing countries. The Center will have a strong focus on professional practice in support of developing current and future Army leaders through its creation of cultural immersion and research opportunities for both cadets and faculty. Slide No. 3 of 30 3/1/12
Our Research Agenda Infrastructure and Other Supporting Enablers: People, Policies, and Technology Future Concepts Installation Operations Warfighting • Nation Reconstruction • Nation Reconstruction • Energy Security • Energy Security • Future Technologies and • Future Technologies and • Forward Operating Bases • Forward Operating Bases • Resource Allocation and • Resource Allocation and Concepts Concepts • Theater Security • Theater Security Efficiencies Efficiencies • Ilities - Sustainability, • Ilities - Sustainability, Cooperation Cooperation • Operations and Disaster • Operations and Disaster Supportability, Affordability, Supportability, Affordability, • Host Nation Capacity and • Host Nation Capacity and Resiliency Resiliency and Adaptability and Adaptability Economic Development Economic Development • Social and Environmental • Social and Environmental • Assessment and Policy • Assessment and Policy Sustainability Sustainability • Reconstruction Training • Reconstruction Training Non Conflict Conflict/Non Conflict Conflict Methods Processes, and Tools (MPTs) Advance the state of knowledge in complex socio-technological systems as related to infrastructure in support of nation reconstruction, security cooperation, and operational needs Slide No. 4 of 30 3/1/12
Our Competencies Life Cycle Cost Analysis Resource Allocation Assessment Decision Analysis Systems Thinking Modeling and Simulation Infrastructure Assessment Economic Development Slide No. 5 of 30 3/1/12
Life Cycle Cost Analysis Formal definition of life-cycle costing A general method of economic evaluation which takes into account all relevant costs over a given period of time adjusting for differences in the timing and the true value of those costs. What is life-cycle cost? Life-cycle cost (LCC) is the total cost of ownership of a product, structure, or system over its useful life. R&D Investment O&S F-16 Fighter 2% 20% 78% M-2 Bradley 2% 14% 84% Slide No. 6 of 30 3/1/12
Agenda • Introduction • The Classical Systems Challenges • Stability and Reconstruction • Life Cycle Considerations • Summary Slide No. 7 of 30 3/1/12
Cost in the Systems Process Component Systems Systems Conceptual Production Operations, Exploration Advanced Integration/ Demonstration, Support, & Development Preliminary Test, and Disposal Design Evaluation High Less Ability to Ability to Influence LCC Influence (85% of Cost LCC Little Ability to Decisions (70-75% Influence LCC (90-95% Made) of Cost of Cost Decisions Minimum Ability to Influence LCC (95% of Cost Decisions Made) (10%-15%) Decisions Made) Made) (5%-10%) 28% Life Cycle Cost 72% Life Cycle Cost Slide No. 8 of 30 3/1/12
The Problem • Increased system complexity • External funding instability • Loss of “mission urgency” at the end of of each major engagement • Diminished depth of talent in the government and/or contractor community • Requirements creep • The need to satisfy demands from an increasingly diverse user community • Inadequate up-front project planning • Lack of management oversight • Accountability • Clear metrics on both the government and contractor sides • Exponential growth in, and reliance on, software • Complex owner/prime/sub interdependencies Slide No. 9 of 30 3/1/12
Current Trends in Military Systems Development Start Plan Phase Out Base Model IOC (Last Model) Notional Projected Lifetime Extended Life We must start designing like private F-14 1969 1973 2010+ 41+ Years industry • Modularity UH-1 1959 1955 2004+ 49+ Years • Open source/architecture • Commercial F-15 1969 1975 2010+ 51+ Years standards • Vendor can no longer own elements SSN 688 1976 1970 2026+ 56+ Years • Upgradability must be a key AIM-9 1955 1953 performance 2025+ 72+ Years parameter • Tradeoff KC-135 2017+ 1954 1957 86+ Years performance for upgradability and sustainability B-52 2040+ 94+ Years 1946 1955 Similar Reality for Enterprise Level IT Systems Many Applications Pre-Date the Internet and the Client-Server Architectural Paradigm Slide No. 10 of 30 3/1/12
The Problem - DoD Technology Cycle Times Primary Structural 15 – 30 yrs Materials/Platforms Mechanical 10 – 15 yrs Systems/Weapon C4 ISR 5 – 8 yrs Infrastructure Sensors 3 – 5 yrs Incremental Acquisition (Pre-Planned Product Improvement) implies known or Communications 1 – 3 fixed requirements IT Hardware .5 - 2 Evolutionary Acquisition implies evolutionary requirements IT Software .5 - 1 Improvised Explosive .01 - 1 Devises Car Bombs .01 - 1 We cannot operate inside our ? ? enemies cycle time - processes are to cumbersome Slide No. 11 of 30 3/1/12
Impact of “Front-End” Investment A NASA View of the Benefits of SE Analysis of Gruhl's NASA Data • Recent National Academies study recommended that we spent more systems engineering resources during 250 concept definition • USAF has embraced this for 200 all future programs % • As complexity increases we must spend more upfront to 150 better develop requirements and manage expectations • Upgradability (modularity, 100 “openness”, no propriatary software, COTs, etc) must be 50 a key performance parameter when buying 0 0 5 10 15 20 25 -50 %RQTDEF Slide No. 12 of 30 3/1/12
Must Better Manage Contractors • Fewer contractors with decreasing government budgets • Are sophisticated global players • Must be smarter buyers/contract writers • Must develop like Toyota, Nokia, Apple • Re-examine the relationships between buyers and vendors Slide No. 13 of 30 3/1/12
How Do We Cost Systems Systems Systems Conceptual Component Productio Operations, Demon- Integration/ Exploratio Advanced n Support, & stration, Preliminary n Develop- Disposal Test, and Design ment Evaluation Parametric Cost Estimation Analogy Detailed Engineering Build Up Primary Technique Some Applicability Little or No Utility Slide No. 14 of 30 3/1/12
Estimating Techniques • Traditional approaches for measuring the technical scope of a development project include top-down, bottoms-up, and analogous estimating techniques. • Top-down estimation starts with an estimate for what the project can or should cost and then allocates it to the various aspects of the project (management, systems engineering, software engineering, hardware engineering, integration testing, system delivery, and system support). – The top-down estimate is often used to obtain a rough-order-of- magnitude estimate of what the project should cost. • Bottoms-up estimation relies on engineers and management personnel to provide task-level estimates from a WBS at some level of detail based on experience; the task-level detail is then summed to produce an overall project estimate. • Analogous estimation predicts future performance based on past performance. • It is normally best if more than one technique is used to estimate a project ’ s technical scope, cost, and schedule for the purposes of accuracy. • Type I (unknown cost categories) are more devastating than Type II (known category but bad cost data) Slide No. 15 of 30 3/1/12
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