4. We still have to manage By The Book
¨ Requirements must be
achievable and documented
¨ Historically derived basis of
estimate
¨ Integrated master schedule
¤ All tasks are planned and linked
¤ Well constructed IAW ANSI 748
¤ Critical path understood and
managed
¤ Fully integrated supplier and
government schedule
dependencies
¨ Integrated data
environment
¤ Deliverables identified in
contractual language
¤ Deliverables integrated into
master schedule
¨ Configuration management
established & active
¨ Timely problem resolution
across contractual lines
¨ Alternate design paths for
critical technologies
8. 1. Baby Bear – just put in a
Low, Medium, or High
confidence interval
2. Mamma Bear – start with
the Baby Bear, see what
happens, make narrow
band adjustments using
past performance and
Anchoring and Adjustment
iterations to elicit credible
numbers
3. Poppa Bear – perform
Reference Class
assessments, along with
Category Risk Drivers for
both Tactical and Program
wide risks that drive cost
and schedule.
Approaches to
Estimates
11. Some Monte Carlo Background
¨ All data in the program are derived from random
numbers.
¨ We must have some knowledge of the underlying
probability distribution that generated these
random numbers.
¨ Without this, our estimates for cost, schedule, or
technical performance are simply 50/50 guesses.
¨ Reverend Bayes taught us this in Bayesian Statistics,
but we forgot that class long ago.
13. Make a List, Check It Twice
1. What can go wrong?
2. How will you recognize it is going wrong before it
is too late to stop it?
3. What can you do to prevent it from going wrong?
4. How much will it cost you if it were to go wrong?
5. How much will it cost you to prevent it from going
wrong?
¨ Keep this list up to date on a weekly basis
¨ Ask and answer the five questions every week.
14. First Step in Making an Estimate
¨ Make point estimates of the desired values
¤ Cost
¤ Duration
¤ Technical performance
¨ Develop these point estimates from reliable sources
¤ Personal experience
¤ Past performance
¤ Same As comparisons
17. In Papa Bear’s House
¨ All numbers are random numbers
¨ Knowing the underlying statistical properties of
these numbers is mandatory
¨ No number in the absence of its statistics is credible
¨ All numbers are correlated in some way
¨ Knowing the correlation is mandatory as well
18. Pearson’s Product Moment Correlation†
åå
å
--
--
=
22
)()(
))((
YYXX
YYXX
r
( )( ) ( )( )å åå å
å å å
--
-
=
2222
* YYnXXn
YXXYn
r
or
number of ordered pairs
standard deviation
mean
first variable of an ordered pair
second variable of an ordered pair
n
X
Y
s
µ
=
=
=
=
=
† Is a measure of the correlation (linear
dependence) between two variables X and
Y, giving a value between +1 and −1
inclusive. It is widely used in the sciences as a
measure of the strength of linear
dependence between two variables.
19. Total Cost by Layering Risk Assumptions
Impact of Risk and Correlation Assumptions on Total System Cost
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$350,000 $400,000 $450,000 $500,000 $550,000 $600,000 $650,000 $700,000 $750,000 $800,000
FY2003 $K
ConfidenceLevel
Point Estimate
NoRiskOnWBSRiskOnInputs
RiskOnWBSNoRiskOnInputs
RiskOnWBSRiskOnInputs
CorOnWBSRiskOnInputs
CorOnWBSCorOnInputs+LowWBS
CorOnWBSCorOnInputs+LowAllElse
20. Connections between and Technical
$
Cost Driver (Weight)
Cost = a + bXc
Cost
Estimate
Historical data point
Cost estimating relationship
Standard percent error boundsTechnical Uncertainty
Combined Cost Modeling
and Technical Uncertainty
Cost Modeling Uncertainty