1. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Pg 1 General Thoughts J. Anderson & A. James Need Agreement to Financial Valuation of DFSS up-front in Contract Benefits taken at project completion (prevents cycle time issues) With an established relationship of trust … clients have been willing partners in BVS. DFSS Charter Business Case must define Success & Value Burden of Value is on project originator at time of Chartering. Valuation must be set at time of chartering with Finance Buy-In. Question to answer - How will success be measured / defined? (does not need to be reoccurring measurement) Realizing … some projects are more easily valued than others Redesign of a Manufactured Sub-Assembly vs. New Product to Market Fixed Fee per project “ok” if part of initial contract … however we feel this leaves $$ on the table and potentially results in a lose of rigor to Project Business Case and Financials. Financial Rigor Up-Front

2. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Pg 2 Payment BVS - DFSS Payment Cycle Contract Negotiations DFSS Project Chartering Identify Phase Completing Project Activity - DOV Set, upfront, valuation method for DFSS Projects (see following slide) Either Individual project valuation (Preferred Method) Or Fixed Fee per project (can be combination of both methods) Establish Business Case for Project Calculated Net- Present Value* Financial Buy-In Reconfirm Financial NPV calculation will result in chartered benefits. Financial Checkbox worked into DFSS Tollgates BB completes project charter as scoped. Financial Refinements as needed (Design Phase) Steering Committee Approval that project complete Appropriate Client Sign-Offs Payment to SSA to begin once project implementation complete Prefer Lump Sum from % of NPV Macro Benefit Calculation Method Set in Contract Final Validation of Valuation Specific Project Benefit Calculation Agreed Upon

3. Copyright © 2001-2005 Six Sigma Academy International, LLC All Rights Reserved Pg 3 DFSS Projects in BVS - Detailed Comments 1. Establish business case Using your company’s existing process (Appropriation Request, Capital Expenditure Request, etc.) establish the business case for the project. Follow company’s procedures, policies and standards for: Determining project benefits Accounting for applicable cost Reporting and accounting for capital expenditures (including depreciation and amortization rules) Sensitivity analysis Business case assumptions (e.g. company/industry/economic conditions) Applicable time-periods (e.g. 3 year ROI, 15 year useful life for M&E, etc.) Request & receive approval from business for project based on business case. Request assistance/guidance from business controller/financial analyst as appropriate. 2. Calculate Net-Present Value Using your company’s existing practices, determine the Net Present Value for the project. Request assistance/guidance from business controller/financial analyst as appropriate. 3. Complete Six Sigma Project Charter Using NPV calculation as project benefit 4. Complete Project Activity Present to Steering Committee for approval Execute project Implement improvement & controls Receive appropriate sign-offs Receive Steering Committee sign-off (close-out) 5. Payments to SSA Payments begin at project completion Based on pre-determined NPV benefits as approved by Steering Committee at beginning of project Project Chartering Steps 1 - 3 Project Completion 4 - 5