1. Modeling the Effect of Budget Constraints
on Cost and Schedule
NASA 2012 PM Challenge
Darren Elliott – Tecolote Research, Inc.
22 February 2012
 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
PRT#115 22 February 2012 Approved for Public Release

2. Outline/Agenda
 Background
 Modeling Techniques
 Summary
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3. Evolution of Cost/Schedule
Understanding
 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
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4. Our Reality is an Integrated System;
Where Budget Availability is a Major Input
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5. Several Tools Have Recently Been Developed
to Assess Impact of Funding Constraints
 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
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6. Modeling the Effect of Budget Constraints on Cost and Schedule
DETERMINISTIC ANALYSIS
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7. 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

8. 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

9. Model Overview
Named
Schedule Cost Budget Excursion
Elements Elements Constraint Budget Results
s Constraint
Engine
Results
Display
Engine
Schedul
e
Element
Referenc
e
Analyze Show
User Interface
PRT#115 22 February 2012 Approved for Public Release

10. Example Analysis: Baseline Case
 Four budget elements, includes series and parallel events
Summary Results Gantt Chart
Date
10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016
Task 1
Task 2
Start Date Finish Date
Task 3
Task 1 10/1/2012 2/13/2016
Task 2 4/1/2013 1/25/2014
Task 4
Task 3 1/26/2014 6/18/2015
Task 4 1/26/2014 11/25/2015
• Each task has an associated TI and TD cost, resulting in the
following spending profile: Summary Results by Schedule Elements (Constant Year $)
250
This example assumed 200
up to $200 was
available per year, as 150
Task 4
demonstrated by the
$M
Task 3
Task 2
black line 100
Task 1
50
0
2011 2012 2013 2014 2015 2016 2017 2018
PRT#115 22 February 2012 Approved for Public Release

11. 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)
Summary Results Gantt Chart Summary Results by Schedule Elements (Then Year $)
200
Date
10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017 180
160
Task 1 140
120
Task 4
$M
100 Task 3
Task 2
80 Task 2
Task 1
60
Task 3
40
20
Task 4 0
2011 2012 2013 2014 2015 2016 2017 2018 2019
Summary Results Gantt Chart - Original Budget
Date
10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017
Original Duration Excursion Duration Original Cost Excursion Cost
Task 1
Task 1 1230 1541 $402.64 $453.18
311 day slip from Task 2 299 356 $69.35 $72.70
Task 2 baseline
Task 3 508 666 $57.99 $63.28
Task 4 668 874 $144.35 $170.78
Task 3
Task 4
PRT#115 22 February 2012 Approved for Public Release

12. 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

13. Example Analysis: Excursion 2
 Prioritizing Task 1 allows it to finish earlier, and moves the
entire project back to the left
Summary Results Gantt Chart
Date
10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017
Task 1 Excursion 1 Finish Date
Task 2
Baseline Finish Date
Task 3
• Task 1’s earlier
Task 4
completion frees up
money for Tasks 3 and 4
• Final cost in this case: $708 Summary Results by Schedule Elements (Constant Year $)
– Final cost in Excursion 1: $760 160
– Final cost in Baseline: $674 140
120
100
Task 1
$M
80 Task 2
Task 3
60
Task 4
This is an example of how the tool can be 40
used to potentially optimize cost and 20
0
schedule within a budget constraint 2011 2012 2013 2014 2015 2016 2017 2018
PRT#115 22 February 2012 Approved for Public Release

14. 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
Summary Results Gantt Chart
Date
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
• This example finishes at nearly the same time as the original excursion
– Total cost reduced to $743, compared to the excursion 1’s $760
PRT#115 22 February 2012 Approved for Public Release

15. Modeling the Effect of Budget Constraints on Cost and Schedule
COST RISK ANALYSIS
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16. Current Techniques to Align Cost and Schedule
via Uncertainty Analysis
Total - Cost Estimate Uncertainty Analysis Results BY2010 $M
100.0% 4.5%
90.0% 4.0%
80.0% 3.5%
Probability (Histogram)
70.0%
Confidence Level (CDF)
3.0%
60.0%
2.5%
50.0%
2.0%
40.0%
1.5%
30.0%
20.0% Time Phased - Risk Adjusted Estimate 1.0%
Technical $100
10.0% 0.5%
Parameters $90
0.0%
$75 $215 $356 $497 $638 $778 $919 $1,060 $1,201 $1,341
0.0%
Allocated Dollars for 70% CL
$80 Probability Histogram Confidence Level (CDF)
CERs Point Estimate
$70 Cost Uncertainty Analysis
$60
TY $M
$50
$40
$30
$20
Project Finish Date
$10
100.0% 2.0%
$0
90.0% 1.8%
80.0%
2006 2007 2008 2009 2010
1.6%
2011 2012 2013 2014 2015 2016
70.0% 1.4%
Probability (Histogram)
Confidence Level (CDF)
60.0% 1.2%
50.0% 1.0%
40.0% 0.8%
30.0% 0.6%
20.0% 0.4%
10.0% 0.2%
0.0% 0.0%
24 Mar 2012 24 Dec 2012 24 Sep 2013 24 Jun 2014 24 Mar 2015 24 Dec 2015
Probability Histogram Confidence Level (CDF)
Schedule Schedule Uncertainty Analysis
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17. However, Budget Profiles Rarely Match
Risk-Adjusted Time-Phased Estimates
$100
$90
Allocated Dollars for 70% CL
$80
Shortfall Point Estimate
$70
Project Budget
$60
TY $M
$50
$40
$30
$20
$10
$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
 Annual budget sufficient to cover estimated point estimate effort
 Shortfall in funding 70% effort for years 2007-2011
How Does Shortfall Impact Project?
PRT#115 22 February 2012 Approved for Public Release

18. 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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19. General Approach for Three
Different Scenarios
PRT#115 22 February 2012 Approved for Public Release

20. 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  Advanced Considerations
 Extend budget at peak
 Incorporating fixed costs (LOE) into
 Infuse/Reduce funds in specific
consideration
year
 Conducting portfolio analysis
 Allow budget carryover
 Incorporate penalties for rollover  Outputs
effort:  Initial phasing result for Target CL
 Inflation considerations  Constrained phasing result
 Productivity loss  Additional years of funding required
PRT#115 22 February 2012 Approved for Public Release

21. Example Case – 70% Effort
Exceeds Available Budget
 Phased budget and point estimate
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
Cost Estimate Uncertainty Analysis Results TY $M
100.0% 4.5%
 Cost risk analysis data (TY$M) 90.0%
80.0%
4.0%
3.5%
Probability (Histogram)
Point Confidence Standard 70.0%
Confidence Level (CDF)
3.0%
Mean CV 60.0%
Estimate Level Deviation 50.0%
2.5%
2.0%
40.0%
$311 42% $372 $168 0.45 30.0%
1.5%
20.0% 1.0%
10.0% 0.5%
0.0% 0.0%
$75 $216 $357 $499 $640 $781 $922 $1,063 $1,205 $1,346
Probability Histogram Confidence Level (CDF)
 Cost estimate @ 70% confidence level
TY$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
Budget Shortfall to Fund 70% CLE
PRT#115 22 February 2012 Approved for Public Release

22. Understanding the Shortfall – Work
Slips to the Right
 Budget exceeds
Budget vs 70% Risk-Adjusted Estimate - Surplus/Shortfall
Budget vs Pt Estimate - Surplus/Shortfall  Total Budget
phased point
$25 estimate in every year
inadequate to
$26M Total Shortfall -
$89M Budget Surplus  Limited70% CLE
fund surplus in
$20 early years
Funds Available For
Reserve Utilization 

Largeglance seems
At first
shortfall
$15
in early years, if
that enough reserves
Annual Surplus / Shortfall - TY$M
are available for
$10
funds
program cannot
be obtained,
$5
$5 effort will slip
into future
$0
$0
2007
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014
2014
periods
-$5
-$5
 2007 work
slips to 2008
-$10  and so on…
$50M of work effort  Extended work
-$15
cannot be done in carries
2007-2011 penalties
-$20
 Inflation
-$25  Productivity
What are Possible Budget Scenarios?
PRT#115 22 February 2012 Approved for Public Release

23. 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
$100.000
$90.000
$80.000
$70.000 Project Budget
$60.000
$50.000
$40.000
Budget Extension
at Peak
$30.000
$20.000
$10.000
$0.000
2007 2008 2009 2010 2011 2012 2013 2014 2015
PRT#115 22 February 2012 Approved for Public Release

24. Example Case Results – Effort Rollover
Fits Under Budget Constraint
$100
70% Risk Adjusted Estimate
RolloverEffort
70% Risk Adjusted Estimate
$90 14
2
3 Budget Funded Effort
BudgetEstimateEffort
Point Funded Effort
Budget Funded
$80
70% Risk Adjusted Estimate
Project Budget
Extended Budget
$70 Extended Budget
$60
$50
$40
$30
$20
$10
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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
PRT#115 22 February 2012 Approved for Public Release

25. Modeling the Effect of Budget Constraints on Cost and Schedule
INTEGRATED COST AND
SCHEDULE RISK ANALYSIS
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26. 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

27. 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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28. Modeling Approach – Enabling
via Budget Organization Levels
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29. Example Simple Project Model
(5 Budget Organization Items)
Budget
Effort/Costs
Schedule
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30. Model in Action – What Happens When
Effort Exceeds Budget Availability
Organization 1
Organization 2
Time
Time-Driving Costs (Touch Labor, Materials, etc.) Schedule Activity
Time-Driving Costs Driven By Schedule Slip Milestone
Level Of Effort Costs Schedule Dependency
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31. Modeling the Effect of Budget Constraints on Cost and Schedule
SUMMARY
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32. Summary
 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
Budget
Duration
Technical
Reqts Work Plan
Scope
Cost
Effort Size
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33. Thank You
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