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February 2005 “Cost Forecasting and Analysis for the Un-Initiated” (Part 2) Arthur Griffiths Chairman, SCAF 23 rd February 2005.

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Presentation on theme: "February 2005 “Cost Forecasting and Analysis for the Un-Initiated” (Part 2) Arthur Griffiths Chairman, SCAF 23 rd February 2005."— Presentation transcript:

1 February 2005 “Cost Forecasting and Analysis for the Un-Initiated” (Part 2) Arthur Griffiths Chairman, SCAF 23 rd February 2005

2 February 2005 Contents Part 1 Requirements for project success Requirements for project success Cost estimating basics Cost estimating basics Principles of Cost Analysis Principles of Cost Analysis Elements of Life Cycle Costing Elements of Life Cycle Costing Influences of Costs Influences of Costs Part 2 Illustrations and issues Illustrations and issues Some myths of project management and costs Some myths of project management and costs

3 February 2005 Some Illustrations and issues from actual programmes for discussion

4 February 2005 Fighter Aircraft Collaborative development, 250 off Should the amortized training costs of pilots be appearing here? RDT&E (10%) Prod. Inv. (1%) Production (37%) Running: Crew (12%) Running: non- crew (40%)

5 February 2005 Air defence frigate 12 off, single nation project RDT&E (0.5%) Prod. Inv. (5.5%) Production (45%) Running: crew (15%) Running: non- crew (34%) Should this exclude the three crew ashore for every one afloat? Should this exclude the RDT&E of engines and of weapon systems?

6 February 2005 Armoured Personnel Carrier Single nation development 500 off RDT&E12% Prod.Inv 1% Production 31% Running: crew 29% Running: non- crew 27% Should this include wear and tear in peacekeeping roles? Should infantry carried be excluded from “crew”?

7 February 2005 Communications system Divisional coverage: 4 off RDT&E 28.9% Prod.Inv 0.1% Production 14% Running: non- crew 57% Who and where are the crew of a field radio?

8 February 2005 Small tactical UAV 250 off developed de novo RDT&E82% Prod.Inv 1% Production 7% Running: non- crew 10% Should running costs include replacement of UAV written-off in training? Should ground operators be excluded – are they not “crew”?

9 February 2005 Costing Boundaries Armed services comprise a mix of personnel, equipment and support services in symbiotic and synergistic relationship one with the others. Life-cycle costing involves, therefore, arbitrary boundaries on what comprises the item of equipment being costed. The setting of these can profoundly affect the level and composition of cost attributed to the equipment.

10 February 2005 Some Myths of Project Management and Costs

11 February 2005 Breaking the Mould Myth: This time, we are breaking the mould. Therefore, it will be much cheaper than history would suggest. Reality: It is to be hoped that the mould is being broken again. Every generation breaks the mould. It is the way productivity grows. The mould has to be broken again to be consistent with history. If it is not then the costs will be even higher than history indicates.

12 February 2005 Design to Cost and Cost as an Independent Variable Myth: This time costs will be much lower because should it be more expensive than before, then we will trade off performance for cost. Reality: When you have finished doing that then you will find that the same cost buys only much the same performance as before. Then, where will be the justification for the expense of developing a new design?

13 February 2005 Risk Register ju-ju Myth: It will not be as expensive as past projects would suggest because we have done a detailed risk analysis and identified all the risks. Reality: The majority of risks eventuating during development are not identified beforehand even with the most comprehensive modern risk analysis.

14 February 2005 The Technological Fix Myth: Technology has moved on. We know so much more now. We will not make the same mistakes of the past. So, it will be cheaper than history would indicate. Reality: Technology may have advanced but so has what is being asked of it. Knowledge and requirements stand much as they ever did in relation to each other. There are an infinity of ways of getting it wrong. Knowing how to avoid one or two of these does not shorten the odds much.

15 February 2005 All the Experts Say Myth: We have employed a huge team of technical experts and they agree that your historically-based estimates are far too high. Reality: Group “think” only facilitates the belief in the impossible. Technical experts see the wood and not the trees.

16 February 2005 Mature Technology Myth: It will be very cheap to develop because it uses only mature technology. Reality: All projects are at the cutting edge of technology until the time comes to cost them – when all wonderfully transform into mundane applications of the completely understood. Development cost is not primarily in R&D but in demonstrating compliance with the specification – necessary however mature the technology may be.

17 February 2005 Future of the Company Myth: They will deliver – they must because the future of the company depends upon it. Reality: Whatever happened to …..? Necessity is not assurance, aspiration is not performance.

18 February 2005 “Where next with cost estimation and control”

19 February 2005 Questions & Contact Details Arthur Griffiths HVR Consulting Services Ltd Selborne House Mill Lane AltonHants GU 34 2QJ Tel: 01420-87977 Email:

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