Tactical Missile Bluebook Cost Model Development Presented to 2012 ISPA/SCEA Joint Conference Orlando, FL

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1 Tactical Missile Bluebook Cost Model Development Presented to 2012 ISPA/SCEA Joint Conference Orlando, FL presented by: Donald Trapp Technical Manager Noah Wright Jr. Cost Analyst Lisa Hackbarth Jr. Cost Analyst Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop MCR, LLC

2 Acknowledgements The authors also acknowledge the valuable assistance of Mr. Ferg Buck Alleman, Ms. Samantha Cheng, Ms. Lisa Hackbarth, and Mr. Ariz Sirkhan, who assisted in data analysis MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 2

3 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 3

4 Purpose Develop a Tactical Missile Cost Model Cost Data Source: Missile subset of the Defense Cost and Resource Center (DCARC) database Cost Model provides: Development and production estimates Production estimates for specific units and lot totals Estimates using several methods Allows user selection of CERs and factors, if desired Probability distributions and total error characteristics Features of the Cost Model have application to cost modeling of other systems MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 4

5 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 5

6 Bluebook Contents Missiles in dataset Production CERs Cost Improvement & Production Rate Slopes Production Below-the-line Costs & Charges Bottom-up and Top-down approaches Development Costs Appendices (Contain Proprietary Data) 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 6

7 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 7

8 Development Process Bluebook Development Process Data Collection Cost Data Technical Data Data Normalization Scope Technology Quantity Inflationadjustments CER Development Regression U1000 UAIV w/ & w/o Rate CER Selection Bluebook Documentation CER Forms and Coefficients Data Points Data Quality WBS Definition Normalization Assumptions Fit Statistics Data Statistics 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 8

9 Data Collection: Cost Data Data used to develop the CERs and factors came from missile subset of the Defense Cost and Resource Center (DCARC) database Individual contract costs and quantities data by lot. Cost data normalized to FY2011 $K and common WBS elements 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop - 9

10 Normalization: Basic WBS Structure Missile WBS Prime Mission Product Below-the-Line 1.0 MISSILE SYSTEM 1.1 AIR VEHICLE PROPULSION PAYLOAD WARHEAD AIRFRAME GUIDANCE AND CONTROL EQUIPMENT INTEGRATION, ASSEMBLY, TEST & CHECKOUT OTHER 1.2 COMMAND AND LAUNCH 1.3 INTEGRATION, ASSEMBLY, TEST, AND CHECKOUT 1.4 SYSTEMS ENGINEERING/PROGRAM MANAGEMENT 1.5 SYSTEMS TEST AND EVALUATION 1.6 TRAINING 1.7 DATA 1.8 PECULIAR SUPPORT EQUIPMENT 1.9 COMMON SUPPORT EQUIPMENT 1.10 OPERATIONAL/SITE ACTIVATION 1.11 INDUSTRIAL FACILITIES 1.12 INITIAL SPARES AND REPAIR PARTS 1.13 G&A\FEE\COM 1.14 OTHER 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

11 Normalization for Scope: Data Filters Missile Data Production Data Set Unfiltered Data Set 125 Systems 586 Models 1460 Cost Reports Filters 1) Tactical missiles 2) Solid rocket motor 3) CPR or CDSR 4) >50% spent 5) Lot cost and quantity anomalies 6) > 3 lots for a particular missile model Filtered Data Set 12 Systems 18 Models 153 Cost reports 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

12 CER Regressions CER Type Dependent Variable Independent Variable(s) U1000* 1000 th Unit Cost Tech Data UAIV Specific Unit Cost Tech Data, Unit # UAIV with Prod. Rate Specific Unit Cost Tech Data, Unit #, Prod. Rate *and one U1 CER Y = Cost of a specified production unit (FY2011$K) a,b,c,d,e,f = Coefficients of the regression X = Technical variable (there may be more than one X) D = Dummy variable (1 = applicable, 0 = not applicable [there may be more than one D]) U = Unit number R = Production rate (units produced per year) ε = multiplicative error 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

13 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

14 Cost Model Overview (1 of 2) What it does Estimates cost in two ways Specific unit Lot total Estimates are derived using different methods CERs (U1000, UAIV, UAIV w/ Rate) Total Air Vehicle Sum of Subsystems Total Cost Factors Below/Above-the-line Charges Step-up 5/10/2012 Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

15 Cost Model Cost Model Overview (2 of 2) Initial Purpose: Build a cost model to cross-check documentation Outcome: Estimating tool that provides many options and shows how each compare statistically Shows probability distributions for each CER, applied factor and method of arriving at total price Fifteen Excel Sheets Front Matter Cover Instructions Contents Inputs Technical drivers Programmatic info CER Spreadsheets AV Production CERS Subsystem CERs Total Cost CERs Rollup Production Rollup Bottom-Up Top-Down Development Rollup Summary Probabilistic Results 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

16 Cost Model Data Input Tab TACTICAL MISSILE COST MODEL INPUTS Input Values in Blue Highlighted Cells Use Drop Down Box Below Mission Type Air Ground Tactical Missile Name Sample Missile Air to 1 2 Ground to 3 4 Recommended Range* Air Vehicle Missile Type Diameter (in) to 24 Mission Type 1 (1,2,3 or 4) Length (in) to 210 Air Launch 1 AV Weight (lb) to 3,748 Air-to-Ground 0 Air-to-Air 1 Propulsion Interceptor 1 Length (in) to Other Variables 1=Yes Shaped-Charge 0 0=No Warhead TV Guidance 0 Length (in) to 50 Infrared Seeker 0 Explosive Weight (lb) to 180 Active Radar 0 Shoulder Launch 0 Guidance and Control First Contract Year 1982 Year>1965 G&C Volume (in 3 ) 1, to 3,861 Weight (lb) to Production Specific Prod. Unit 500 Performance Lot Size 1,000 Velocity (ft/sec) 3, ,125 to 5,627 First Unit 1,001 Total Impulse (klbf-s) to 274 Last Unit 2,000 Max Range (nmi) to 88.6 Lot Midpoint 1,465 Prod. Rate (units/yr) 1,000 * Low and high values for missiles used in developing the cost model. Lot Duration (years) 1.0 Development Step-up Factor recommended in Bluebook # of Prototype Units MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

17 Example: Sample Missile Missile Components AIRFRAME DIAMETER WARHEAD LENGTH PROPULSION LENGTH Example shows many of the cost model input parameters 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

18 Air Vehicle/Prime Mission Product CERs Tab Air Vehicle CERs (Thousands of FY2011$) Missile: Sample Missile Unit and Lot Costs U1000 U for xth unit Lot Cost Std Error # of Units 1, ,000 1, ,000 U1000 CERs 1 Total Impulse, Air Launch $ $ $ 519,446 $ $ $ 140,876 2 Length $ $ $ 578,288 $ $ $ 251,024 3 Range, Velocity (Air launch only) $ $ $ 494,721 $ $ $ 169,240 UAIV CERs without Rate 1 Total Impulse, Air Launch, Interceptor $ $ $ 459,459 $ $ $ 117,796 2 Total Impulse, Air Launch $ $ $ 472,521 $ $ $ 123,092 3 Length $ $ $ 555,487 $ $ $ 243,552 UAIV CERs with Rate 1 Rate, Total Impulse, Air Launch, Interceptor $ $ $ 419,843 $ $ $ 102,104 2 Rate, Total Impulse, Air Launch $ $ $ 444,509 $ $ $ 111,899 3 Rate, Length $ $ $ 522,379 $ $ $ 228,854 Air Vehicle U1000 PDF $0 $500 $1,000 $1,500 $2,000 Thousands of $ U U U UAIV 1 UAIV 2 UAIV 3 UAIV+R 1 UAIV+R 2 UAIV+R 3 Air Vehicle U1000 CDF 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $0 $500 $1,000 $1,500 $2,000 Thousands of $ U U U UAIV 1 UAIV 2 UAIV 3 UAIV+R 1 UAIV+R 2 UAIV+R MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

19 Production Rollup Tab (1 of 2) Bottom-up and Top-down approaches on different tabs Three different CER types AV, Total Cost & Price and also AV as sum of subsystems AV and Total Cost U1000 values Probability distribution graphs Total Production Costs (Thousands of FY2011$) Bottom-Up Approach Unit Info: Missile: Sample Missile First Unit Last Unit Quantity Lot Midpoint µ = Point Estimate σ = Point Estimate Error Correlation Coefficient AIR VEHICLE LOT COST STATISTICS CER Type Air Vehicle PMP BTL Total Cost µ σ µ σ ρ (COST) µ σ µ σ ρ (PRICE) µ σ U1000 $ 519,446 $ 140,876 $ 147,778 $ 151, $ 667,224 $ 272,452 $ 151,806 $ 156, $ 819,030 $ 377,381 UAIV $ 459,459 $ 115,181 $ 130,712 $ 123, $ 590,171 $ 207,770 $ 134,275 $ 121, $ 724,446 $ 279,851 UAIV w/ R $ 419,843 $ 100,220 $ 119,442 $ 111, $ 539,284 $ 181,415 $ 122,698 $ 117, $ 661,982 $ 253,708 AIR VEHICLE AS THE SUM OF SUBSYSTEM LOT COSTS CER Type Air Vehicle PMP BTL Total Cost Charges Total Price Sum µ σ µ σ ρ (COST) µ σ µ σ ρ (PRICE) µ σ U1000 $ 371,583 $ 85,930 $ 105,712 $ 120, $ 477,295 $ 174,463 $ 108,594 $ 127, $ 585,889 $ 272,160 UAIV $ 335,990 $ 100,936 $ 95,586 $ 93, $ 431,576 $ 146,839 $ 98,192 $ 88, $ 529,768 $ 203,738 U1000 ρ (U1000 SUBSYS) = 0.17 Propulsion $ 58,665 $ 24,256 Total PSE Warhead $ 7,950 $ 2,001 PMP BTL Tot Cost Tot Price Other Payload $ 2,806 $ 707 AV Airframe $ 28,800 $ 9,678 U % 102% 41% 46% G&C $ 273,362 $ 73,744 UAIV 25% 95% 35% 39% UAIV ρ (UAIV SUBSYS) = 0.31 UAIV w/ R 24% 93% 34% 38% Propulsion $ 34,276 $ 11,930 AV as Sum Warhead $ 8,341 $ 3,824 U % 114% 37% 46% Other Payload $ 2,944 $ 1,350 UAIV 30% 97% 34% 38% Airframe $ 28,030 $ 8,192 G&C $ 262,399 $ 90,271 5/10/2012 Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop Charges Total Price

20 Production Rollup Tab (2 of 2) Below the Line (BTL) Production Factors & Pricing Factors Provide a guideline Can be overwritten Large PSEs, but factors are small values BELOW-THE-LINE PRODUCTION FACTOR STATISTICS WBS # Use Factor? U1000 UAIV UAIVR µ σ µ σ µ σ 1.3 IAT&CO NO 3.9% 318% 297% 308% $ - $ - $ - $ - $ - $ SEPM YES 13.9% 214% 155% 149% $ 72,023 $ 160,935 $ 63,705 $ 103,173 $ 58,212 $ 90, STE YES 3.1% 355% 249% 247% $ 15,958 $ 58,807 $ 14,115 $ 36,396 $ 12,898 $ 32, Training YES 1.6% 417% 385% 369% $ 8,436 $ 36,530 $ 7,462 $ 29,651 $ 6,819 $ 25, Data YES 2.3% 266% 253% 258% $ 11,975 $ 33,138 $ 10,592 $ 27,795 $ 9,679 $ 25, & 1.9 Total Support Eq. YES 2.3% 352% 337% 348% $ 12,030 $ 44,003 $ 10,641 $ 37,059 $ 9,723 $ 34, Op/Site Act. NO 2.3% 112% 109% 94% $ - $ - $ - $ - $ - $ Industrial Fac. NO 15.1% 267% 187% 179% $ - $ - $ - $ - $ - $ Initial Spares YES 5.3% 120% 121% 124% $ 27,356 $ 34,879 $ 24,197 $ 30,741 $ 22,111 $ 28, Other Missile NO 3.5% 189% 209% 197% $ - $ - $ - $ - $ - $ - PRICING FACTORS WBS # Cost Element Total BTL Pricing Element Weighted Mean Weighted Mean PSE Air Vehicle U1000 UAIV UAIV w/ R 102% 95% 93% $ 147,778 $ 151,003 $ 130,712 $ 123,916 $ 119,442 $ 111,171 ρ (BTLF) = ρ (BTLF) = ρ (BTLF) = 0.00 PSE Air Vehicle U1000 UAIV UAIV w/ R U1000 UAIV UAIVR µ σ µ σ µ σ G&A 10.7% 100% 78% 78% $ 71,253 $ 82,620 $ 63,025 $ 56,451 $ 57,590 $ 51, Fee 8.9% 243% 93% 152% $ 65,722 $ 171,959 $ 58,132 $ 59,710 $ 53,120 $ 85, COM 1.3% 707% 169% 400% $ 8,945 $ 68,405 $ 7,912 $ 14,414 $ 7,230 $ 30, Other Charges 0.9% 1183% 1530% 1530% $ 5,886 $ 75,248 $ 5,207 $ 84,460 $ 4,758 $ 76,805 Total Charges 103% 91% 96% $ 151,806 $ 156,867 $ 134,275 $ 121,923 $ 122,698 $ 117,552 ρ (PRICING) = ρ (PRICING) = 0.02 ρ (PRICING) = MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

21 Production Price Options Calculate total cost and total price using three methods Total Price Sum of Total Cost and Pricing Factors Total Cost Either Top-Down or Bottom-Up + Pricing Factors G&A, Fee, COM, Other Charges Top-Down Approach Includes PMP and BTL Costs Bottom-Up Approach Sum of PMP and BTL Costs PMP Cost Either Sum of Subsystem Costs or AV Cost CER + BTL Items Factor of PMP Costs Sum of Subsystem Costs AV Cost CER 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Subsystem CERs Joint Annual Conference AV and CER Training Workshop

22 Cost Model Summary Tab (1 of 2) Shows two different approaches Each different CER type AV, Total Cost & Price Confidence estimates for any confidence level AV and Total Cost U1000 values Probability distribution graph comparing different CERs and approaches Summary Select Specific Cost Type and input Confidence Value in Blue Highlighted Cells Missile:Sample Missile Estimate Total Cost 90.0% Confidence Level Prod. Lot Information Lot Size 1000 Total Production Costs (Thousands of FY2011$) First Unit 1001 Top-Down Approach Last Unit 2000 AIR VEHICLE LOT COSTS Total Cost at % diff. AV PMP Total Cost CER Type Air Vehicle PMP BTL Total Cost Charges Total Price 90% Confidence from Mean U1000 U1000 U1000 $ 519,446 $ 81,563 $ 601,009 $ 140,083 $ 741,092 $ 835, % $ $ UAIV $ 459,459 $ 84,260 $ 543,719 $ 126,730 $ 670,449 $ 783, % $ $ UAIV w/ R $ 419,843 $ 68,793 $ 488,636 $ 113,891 $ 602,527 $ 694, % $ $ CoV Bottom-Up Approach AIR VEHICLE LOT COSTS Total Cost at % diff. AV PMP Tot Cost CER Type Air Vehicle PMP BTL Total Cost Charges Total Price 90% Confidence from Mean U1000 BU/TD U1000 $ 519,446 $ 147,778 $ 667,224 $ 151,806 $ 819,030 $ 1,021, % $ % UAIV $ 459,459 $ 130,712 $ 590,171 $ 134,275 $ 724,446 $ 862, % $ % UAIV w/ R $ 419,843 $ 119,442 $ 539,284 $ 122,698 $ 661,982 $ 777, % $ % AIR VEHICLE AS THE SUM OF SUBSYSTEM LOT COSTS U1000 $ 371,583 $ 105,712 $ 477,295 $ 108,594 $ 585,889 $ 705, % $ UAIV $ 335,990 $ 95,586 $ 431,576 $ 98,192 $ 529,768 $ 624, % $ CoV Production Cost Probability Distribution Tot. Cost BU AV U1000 Tot. Cost BU AV UAIV Tot. Cost BU AV UAIV Rate Tot. Cost TD AV U1000 Tot. Cost TD AV UAIV Tot. Cost TD AV UAIV Rate $- $250 $500 $750 $1,000 $1,250 $1,500 $1,750 5/10/2012 Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop Millions

23 Cost Model Summary Tab (2 of 2) Shows cost in U1000 value: Air Vehicle CERs (# of possibilities) U1000 (3) UAIV (3) UAIV with Rate (3) AIR VEHICLE Estimate of U1000 (using U1000 CERs) U1000 Dropdown List Below: U1000 (1-4) 1 Total Impulse, Air Launch $ Estimate of U1000 (using UAIV CERs) UAIV Dropdown List Below: UAIV w/o Rate (1-3) 1 Total Impulse, Air Launch, Interceptor $ Estimate of U1000 (using UAIV with Rate CERs) UAIV-Rate Dropdown List Below: UAIV w/ rate (1-3) 1 Rate, Total Impulse, Air Launch, Interceptor $ Air Vehicle as a Sum of Subsystems (# of poss.) Propulsion U1000 (3), UAIV (1) Warhead U1000 (3), UAIV (2) Airframe U1000 (3), UAIV (1), UAIV w/ Rate (1) G&C U1000 (6), UAIV (2), UAIV w/ Rate (1) User is able to choose different CERs (different technical characteristics, and CER forms) and see how rollups differ Air Vehicle as a Sum of Subsystems Estimate of U1000 (using U1000 CERs) Sum of Subsystems U1000 CERs $ Propulsion Dropdown List Below: U1000 (1-3) 1 Range, Air-to-Ground $ 61.9 Warhead Dropdown: U1000 (1-3) 1 Length, Shaped-Charge $ 8.8 Other Payload =35.3% of Warhead $ 3.1 Airframe Dropdown: U1000 (1-3) 1 Range, Diameter, Air Launch $ 31.8 G&C Dropdown: U1000 (1-6) 1 G&C Volume, Air Launch (no Shoulder launch) $ Estimate of U1000 (using UAIV CERs) Sum of Subsystems UAIV CERs $ Propulsion Dropdown List Below: UAIV w/o Rate (1) 1 Velocity, Length, Range, Air-to-Air $ 36.2 Warhead Dropdown: UAIV w/o Rate (1-2) 1 UAIV Length, Shaped-Charge $ 9.6 Other Payload =35.3% of Warhead $ 3.4 Airframe Dropdown: UAIV w/o Rate (1) 1 Diameter, Air Launch $ 30.2 G&C Dropdown: UAIV w/o Rate (1-2) 1 G&C Volume, Air Launch, Active Radar $ MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

24 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

25 Summary Benefits to developing Tactical Missile Cost Model Allowed CER developers to build model from user s perspective Assisted in providing a quality review of Bluebook CERs and factors Provided better understanding of total error characteristics Automated cost estimation with error statistics and probability distribution curves 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

26 Contents Purpose Bluebook Contents Development Process Cost Model Views Summary Acronyms 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

27 Acronyms (1 of 2) AV CCDRs CDSRs CER CES COM CPR DCARC DOD DOF exp FCHRs FY2011$K G&A G&C GERM IA&T IAT&CO LCS LMP PEP Air Vehicle Contractor Cost Data Reports Cost Data Summary Reports Cost Estimating Relationship Cost Element Structure Cost of Money Cost Performance Report Defense Cost and Resource Center Departments of Defense Degrees of Freedom e, the mathematical constant Functional Cost-Hour Reports Fiscal Year 2011 Thousands of Dollars General and Administrative Guidance and Control General Error Regression Method Integration Assembly & Test Integration Assembly Test and Checkout Unit Learning Curve Slope Lot Midpoint Producibility, Engineering & Planning 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

28 Acronyms (2 of 2) PMP PSE QAIV R 2 ROM RP SEPM STE U1 U1000 UAIV WBS ZMPE Prime Mission Product (Air Vehicle + Command & Launch) Percent Standard Error Quantity as an Independent Variable Pearson s Correlation Squared Rough-Order-of-Magnitude Repair Parts System Engineering & Program Management System Test & Evaluation First Unit Cost 1,000 th Unit Cost Unit-as-an-Independent-Variable Work Breakdown Structure Zero Percent Bias Minimum Percentage Error 2012 MCR, LLC Presented at the 2012 SCEA/ISPA Joint Annual Conference and Training Workshop

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