Department Of The Army Cost Analysis Manual May 2002

Department Of The Army Cost Analysis Manual May 2002

We are a non-profit group that run this service to share documents. We need your help to maintenance and improve this website. While analogy costing is common, there is a dearth of advice in the literature on the “adjustment methodology”, especially for hardware projects. This paper discusses some potential approaches that can improve rigor and repeatability in the analogy costing process.While analogy costing is common, there is a dearth of advice in the literature on the “a djustment methodolo gy”, especially for ha rdware projects. This paper discusse s some potential approaches that can improve rigor and repeatability in the analogy costing process. An ana logy cost estimate is also useful as a “sanit y” cross -check against results produced b y these other two methods. The basic idea behind the analog y approach is that when a new syste m has functional and performance charac teristics similar to an existing one whose co st is known, the known cost can be adjusted to reflect programmatic and technical differences to develop a co st estimate for the new s ystem. Analogy estimates can be made for whole pr ojects or elements o f a project. Even when some spacecraft subsystems are entirely new d esigns, often others are d eveloped as improved versions of previously successful designs (i.e., heritage designs). If their costs are known, heritage designs can serve as analogy projects, subsystems, or elements. Yet there is a dearth o f technique s and practical advice in the literature on the “ adjustment mechanism”, espec ially f or advanced tech nology hardware projects like space missions. This paper discusses some potential approaches that can improve rigor and repea tability in the analo gy costing process. My review of the literature revealed a number o f relevant cost esti mation handbooks that d iscussed the analogy approach. The focus, ho wever, was on the necessity of documenting the choice of analog project(s), the adj ustment factors, and the cost estimate.http://www.plunge-in.at/userfiles/abit-kn8-manual-download.xml

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This should include the cost experience used, and the method by which the information was evaluated and adjusted to m ake the current cost estimate. If an analog estimate is made using complexity analysis, the basis for the complexity analysis (including backgrounds of the ind ividuals making the ratings), the factors u sed (including the ranges of values), and a summary of the technical characteristics and cost driving elements shall be provided. The Department of the Army Cost Analysis Manual (Ref. 2 ) states similar requirements: The anal yst must show the validity of the direct comparison. A variation to this methodology is to adjust the historical data to account for some variation in the proposed system, activity, or item. In contrast, the FAA Life Cycle Cost E stimating Handbook (Ref. 3) devotes an entire chapter to analogy estimating. The three factors are (1) a co mplexity factor, based on desi gn and performance differences assuming no special miniaturization and manufacturing technology d ifferences; (2) a miniaturization factor; and (3) a productivity improvement factor, based o n improvements in technology (i.e., how much the “production function” has shi fted). T he inclusion of a miniaturization factor re flects concern for “stringent” mass and vol ume constraints on components and subsystems. That this factor h as not played a role in space system analogy costing is curious since there is both a necdotal and hard evidence t hat miniaturization has a strong eff ect on the cost of pla netary rovers, making very small (“nanorovers”) rovers much more expensive p er kilogram than larger ones. The journal literature on analogy cost e stimation was not voluminous and tended to deal m ore with software projects than hardware.http://www.mc-opony.pl/files/abit-kn8-sli-manual.xml

Software p rojects are typically characterized by a few vari ables, most notably source lines of co de (SLOC), which are nearly always collected and available to the developin g organization, so the existence of data sets for even a modest number of si milar completed projects (2 0-30) makes some stati stical tests possible. These journal articles were also useful in framing the methodological issues discussed in the next section. Lastly, some articles dealt with whether analogy cost estimation is better or worse than traditional cost estimating relationships ( CERs). On t his point, controversy remains since the empirical evidence is not co nclusive either way. II. Methodological Issues In analogy cost estimation, three key methodological issues are: (1) deter mining which analogy proj ects are the most appropriate ones to use, (2) the number of analog y projec ts to include in the adjustment mechanism, and (3) what adjustment mechanism will be applied. There are also a number of pro cess issues that organizations wishing to employ analogy estimation must address. When that is not the case, the creation and use of a metric to describe the closeness of one project to another that relie s on technical and programmatic attributes is helpful in finding the most appropriate analog projec ts. When technical and programmatic attributes are continuous variab les, a number of distance metrics have been discussed in the analogy cost literature. 4,5 The most popular ones are shown as Eqs. (1) through (4). The Euclidean distance in Eq. (1) is both normalized to the available data set and weighted by a set of external multipliers ? k. Normalization and w eighting are attempts to balance the importance of each attribute. Normalization is useful in guarding against an overweighting of some attributes sim ply because of the units in which they are measured. The d istance metric in Eq.

(2), often used in cluster analysis, is similar to the square of the Euclidean metric as can be seen from its Taylor expansion. The distance metric of E q. (3) is known as t he “city block” or “Manhattan” metric as it is the “walking” distance when confined to a n -dimensional orthogonal grid. Last, the Eq. (4) metric is called the Chebychev or maximum distance metric. For reasons cited above, both the city block a nd maximum distance metrics should be normalized. Obviously, there is a need then to standardize the values a categorical attribute can take in any analogy database so that the correct calculation i s made. For exa mple, in the original database of space missions obtained for use in this paper, the terms solar panel, solar array, and solar were used to d escribe the main power source. An automated tool for comparing these entries might result in a mismatch. The results did not contradict this assertion, which the reader may verify using the data in the Appendix.It can also be applied when only a few of the parametric cost model’s inputs are known since defaults can be substituted for those that are as y et undetermined. Scope addresses quantity or size, for example, the number equipment design or assemblies. Complexity addresses how difficult the task is, for exa mple, the stringency of technical performance requirements or lack of inheritance. Simple pr oportions (linear interp olation) could be used in which the lo wer bound project proportion is assigned to the upper bound proj ect cost.Wage rates serve to adjust the costs to account for inflation, if costs are in nominal d ollars in the database. III. Application Whereas the last section discussed distance metrics and potential adjustment mechanis ms in the abstract, the objective in this section is to describe some simple “experiments” that used real data from space missions to form an an alogy cost estimate for a new mission.

I ob tained a database of actual costs, technical, and programmatic attribu tes for those JPL missions sho wn in the Appendix. Technical attributes included spacecraft mass, launch vehicle, subsystem type, trajectory, and redundancy information. Progra mmatic attributes included phase durations, progra m type, spares and reliability class, and spacecraft d eveloper information. The new mission (not in the database) was a nearly completed Mars orbiter project. From these data, I first co mputed a variety of distance metrics, using three types of information that pres umably would be available even in the earliest phases o f a new project. T he purpose of this was to determine whether a consistent closest analogy project would arise in this test case. T able 1 shows the attributes that were used for each distance metric, and the results are shown in the Appendix. Next, I p erformed an analogy cost estimate using upper and lower bound analogy proj ects to constrain the estimate. The results of these experiments are reported below. A. Closest Analogy Project The closest analog y project was not independent of the types o f information used to compute the distance me trics. One might surmise t hat the closest analogy project would be a nother Mars orbiter mission; on this basi s, the schedule-based metrics missed the mark, while the mass-based metrics performed consistently and a s experience might suggest. The metrics based on target body and design choice s tended to pick out the Mars mission s, but the Chebychev version ide ntified more tha n half the datab ase projects as closest a nalogies. This is a conseque nce of using categorical attributes, which is not recommended in th is case. B. Estimating the Cost By Analogy Since the mass-based distance metrics appeared to be consis tent with j udgment, I selected the Mars Observer mission as an upper bound analo gy project and the Mars Odyssey (also a n orbiter) as a lower bound anal ogy project.

I computed the weights i n Eq. (7) using both Eq. (7’) and simple linear interpolation for each of the four mass -based metrics, and applied these weights to the actual cost of the analogy projects. T able 2 shows the results. The si mple linear interpolation performed better in this test case, though all estimates were within 20% of the actual cost of the n ew mission. The Euclidean distance metric performed uniformly better t han the others, and in combination with the linear interpolation, produced a remarkably accurate estimate. Each of th e parameters we re normalized and weighted equally within their re spective distance metrics. The design choices attributes were co mposed entirely of “categorical” parameters, which prohibited th e use of the log ratio metric. Target bodies were represented by numerical va lues. Weights Euclidean Log Ratio City Block Chebychev Using Eq.(7’) 1.132 1.197 1.192 1.186 Using Linear Interpolation 1.011 1.172 1.132 1.109 Table 2. Ratio of Estimated Cost to Act ual Cost. Results for different distance metrics based on flight system mass and differen t interpolation techniques are shown. The “actual” cost fo r the test case represen ts the nearly completed project’s actuals - to -date plus an estimate of remaining cost, including reserves. Conclusion Far more experimentation, test cases, and data are needed to improve analogy cost estimation for space missions. From the test case inv olving an upcoming Ma rs orbiter mission, the distance metrics most aligned with judgment are those that co mbine simple mass attributes — flight system dry mass and flight s ystems wet mass. Those based on schedule did not perform well, and those based on design choices p roduced too many analogy projec ts. Some combination of mass parameters and design choices remains unexplored.

In estimating the cost of the Mars orbiter mission usi ng upper and lower bound analogy projects to bracket the cost, the Euclidean d istance metric and simple linear interpolation did remarkably well. However, more work is needed to confirm whether this is repeatable. T he author wishes to acknowledge the support of JPL Costing Office and its mana ger, Robert Metzger.This approach, while widely spread in industry, is also subject to critique due to large parameter uncertainty and due to the reliance on small data sets on which regressions are based. Issues are accentuated in early mission formulation efforts, due to the immaturity of the mission concept and technical data available in preliminary design phases. In other words, conventional cost estimation methods sometimes have too high ambitions for the quantity of the information available in early mission formulation. Yet, cost estimation is of primary importance to determine feasibility of a mission within a space program. In this paper, we explore less ambitious approaches based on machine learning algorithms that are better suited to cost estimation for early mission formulation. In particular, we use classification algorithms to categorize missions into a predefined number of cost classes, e.g. Discovery or Flagship mission class. We compare different classification algorithms, study the performance and the utility of different levels of granularity in class definition, and test the proposed approaches on selected Earth Observation missions for which public information on cost is available. The methodology proposed in this paper provides an alternative approach for early cost estimation of new missions to cost and systems engineers. View Show abstract.

A Simulation Tool for Efficient Analogy Based Cost Estimation Article Full-text available Mar 2000 EMPIR SOFTW ENG Lefteris Angelis Ioannis Stamelos Estimation of a software project effort, based on project analogies, is a promising method in the area of software cost estimation. Projects in a historical database, that are analogous (similar) to the project under examination, are detected, and their effort data are used to produce estimates. As in all software cost estimation approaches, important decisions must be made regarding certain parameters, in order to calibrate with local data and obtain reliable estimates. In this paper, we present a statistical simulation tool, namely the bootstrap method, which helps the user in tuning the analogy approach before application to real projects. This is an essential step of the method, because if inappropriate values for the parameters are selected in the first place, the estimate will be inevitably wrong. Additionally, we show how measures of accuracy and in particular, confidence intervals, may be computed for the analogy-based estimates, using the bootstrap method with different assumptions about the population distribution of the data set. Estimate confidence intervals are necessary in order to assess point estimate accuracy and assist risk analysis and project planning. Examples of bootstrap confidence intervals and a comparison with regression models are presented on well-known cost data sets. View Show abstract A fuzzy logic based set of measures for software projectsimilarity: validation and possible improvements Conference Paper Full-text available Feb 2001 Ali Idri Alain Abran The software project similarity attribute has not yet been the subject of in-depth study, even though it is often used when estimating software development effort by analogy. Among the inadequacies identified (M. Shepperd et al.

, 1996; 1997) in most of the proposed measures for the similarity attribute, the most critical is that they are used only when the software projects are described by numerical variables (interval, ratio or absolute scale). To overcome this limitation, we propose a set of new measures based on fuzzy logic for similarity when the software projects are described by categorical data. The proposed measures are validated by means of an axiomatic validation approach. We also present the results of an empirical validation of our similarity measures, based on the COCOMO'81 database View Show abstract Replicated assessment and comparison of common software cost modeling techniques Conference Paper Full-text available Feb 2000 Lionel C. Briand T. Langley I. Wieczorek Delivering a software product on time, within budget, and to an agreed level of quality is a critical concern for many software organizations. Underestimating software costs can have detrimental effects on the quality of the delivered software and thus on a company's business reputation and competitiveness. On the other hand, overestimation of software cost can result in missed opportunities to funds in other projects. In response to industry demand, a myriad of estimation techniques has been proposed during the last three decades. In order to assess the suitability of a technique from a diverse selection, its performance and relative merits must be compared. The current study replicates a comprehensive comparison of common estimation techniques within different organizational contexts, using data from the European Space Agency. Our study is motivated by the challenge to assess the feasibility of using multi-organization data to build cost models and the benefits gained from company-specific data collection. Using the European Space Agency data set, we investigated a yet unexplored application domain, including military and space projects.

The results showed that traditional techniques, namely, ordinary least-squares regression and analysis of variance outperformed analogy-based estimation and regression trees. Consistent with the results of the replicated study no significant difference was found in accuracy between estimates derived from company-specific data and estimates derived from multi-organizational data View Show abstract Using the European Space Agency data set: a replicated assessment and comparison of common software cost modeling techniques Article L. Briand T. Langley I. Wieczorek View An analogy-based method for estimating the costs of space-based instruments Conference Paper Feb 2003 R. Kellogg Sainson Phan First Page of the Article View Show abstract A Fuzzy Logic Based Set of Measures for Software Project Similarity: Article Jan 2004 Ali Idri Alain Abran The software project similarity attribute has not yet been the subject of in-depth study, even though it is often used when estimating software development effort by analogy. Among the inadequacies identified (Shepperd et al.) in most of the proposed measures for the software project similarity attribute, the most critical is that they are used only when the software projects are described by numerical variables (interval, ratio or absolute scale). To overcome this limitation, we propose a set of new measures for similarity when the software projects are described by categorical data. These measures are based on fuzzy logic: the categorical data are represented by fuzzy sets and the process of computing the various measures uses fuzzy reasoning. In this work, the proposed measures are validated by means of an axiomatic validation approach, using a set of axioms representing our intuition about the similarity attribute and verifying whether or not each measure contradicts any of the axioms. We also present in this paper the results of an empirical validation of our similarity measures, based on the COCOMO'81 database.

Read more Poster Full-text available Differences between inpatient DRG payment and estimated costs in Portuguese NHS hospitals October 2015 Bruno Domingues Moita Rui Santana For a given hospital it is expected that the DRG cost weight equals the expected cost of inlier LOS for that DRG. One of the main advantages of using casemix adjustment is that discrimination can be introduced in specific DRGs in order to value them differently than the expected cost. Indirect costing approach using a step-down methodology was gradually implemented in Portugal. The main objective of the study was to define a standardized method to cost hospital inpatient production reflecting the relative weights of DRG tariffs in force and to compare the results obtained with the prospective hospital funding method currently used in Portugal. The same holds for a sequence of fixed priceequilibria, with price adjustment directed by effective excess demands. Labour demand, productionand goods supply are determined by expectations, depending on the demand of the previousperiod. This again leads to cycles and chaos, but also to long periods of ascent and decline. We use simulation experiments to assess the extent of this loss in more complex settings. We find a relatively low loss if the firm plans for capacity using limited demand information and subsequently adjusts product prices to reflect realized market conditions. However, even “reasonable” restrictions on the subsequent price adjustment (e.g., constraining adjusted prices to always exceed full cost) lead to significant economic loss. Read more Article Development and Application of Cost Adjustment Factor Database for an Approximate Cost Estimating Sy. September 2001 Sungkwon Woo Youngsoo Jung Cost Adjustment plays an important role of making appropriate adjustments between the features of a proposed project with those of previous project in estimating based on a historical cost database.

The accuracy and the reliability of estimating results can be also improved by appropriate application of right adjustment factors. Also, it explains why and how those adjustment factors are applied. The results of this study including the adjustment factor database covering many foreign countries provide a good reference not only for the approximate cost estimating of a domestic construction project, but also the project located in the foreign country with no previous experience. Read more Download citation What type of file do you want. RIS BibTeX Plain Text What do you want to download. Citation only Citation and abstract Download ResearchGate iOS App Get it from the App Store now. Install Keep up with your stats and more Access scientific knowledge from anywhere or Discover by subject area Recruit researchers Join for free Login Email Tip: Most researchers use their institutional email address as their ResearchGate login Password Forgot password. Keep me logged in Log in or Continue with LinkedIn Continue with Google Welcome back. Keep me logged in Log in or Continue with LinkedIn Continue with Google No account. All rights reserved. Terms Privacy Copyright Imprint. It may not be available at this time, the URL may have changed, or we may be experiencing technical problems locating it. If possible, include the resource’s title and the URL that is no longer working.