Capabilities-Based Cost Analysis: Adapting to a New Paradigm

The advent of transformational operational concepts emphasizing joint capabilities imposes significant change upon the defense acquisition establishment. The new operational concepts place a premium on integration among discrete systems, and emphasize “jointness” as an organizing principle, with interoperability as a key performance parameter. The traditional acquisition paradigm, which focuses on the “program” or “system” as the unit of interest, is being replaced by “capabilities” and “portfolios” as the objects of management attention. In this new “capabilities-based” construct, the scope and scale of the defense acquisition process expands dramatically, and drives changes in governance which are now only dimly perceived. Still, the nature of public investment,with its checks and balances,will requiresound cost, schedule and performance objectives be established and met.

Along with all other functional disciplines within the DoD, the cost analysis community will be significantly affected by this paradigm shift. Recent history demonstrates that increasing levels of aggregation and complexity tend to confound traditional costing methodologies developed for, and adapted to the “system-centric” view. This phenomenon, coupled with intense scrutiny with respect to cost, schedule and performance outcomes,demands that the DoD cost community develop new methodologies tailored to the capabilities-based paradigm.

This presentation describes the principles, objectives, and status of an ongoing study, led by the Office of the Secretary of Defense Cost Analysis Improvement Group, which attempts to identify the key drivers of cost, schedule and performance outcomes in the capabilities-based context. The study pursues both empirical and theoretical approaches to the issue, with the objective to develop empirical cost estimating methodologies rooted in an evolvable theoretical framework. In particular, in addition to technical characteristics such as number of interfaces of the systems comprising the capability area, the impact of governance structures and stakeholder characteristics are being explored and evaluated.

Research Sponsor

Robert M. Flowe

Operations Research Analyst

Office of the Secretary of Defense,

Program Analysis and Evaluation

Deputy for Resource Analysis

Weapon Systems Cost Analysis Division

Presenters:

William B. Anderson

Software Engineering Institute

Mary Maureen Brown, Ph.D.

Associate Professor

School of Government

University of North Carolina at Chapel Hill

CB#3330 Knapp-SandersBuilding

Chapel Hill North Carolina 27599-3330

Robert R. Jones

Senior Cost Analyst

Technomics, Inc.

201 12th Street Suite 612

ArlingtonVA22202

(703) 412-6097 Office

(703) 798-1507 Cell

(703) 412-0600 Fax

Biographies:

Rob Flowe is an Operations Research Analyst in the Office of the Secretary of Defense, Program Analysis, and Evaluation (PA&E). In this capacity, he serves as Cost Analysis Improvement Group analyst for a variety of major defense acquisition programs, with particular interests in emerging system acquisition concepts, such as Evolutionary Acquisition, Spiral Development, Capabilities-Based acquisition, and software-intensive systems. Rob retired from the USAF in 2003, having gained experience in the acquisition of space, C4I, and software-intensive systems. Rob achieved his Level 3 certification in Program Management from the DefenseSystemsManagementCollege in 1998, has a BS in Aerospace Engineering from Virginia Tech, and a MS in Software Systems Management from the Air Force Institute of Technology.

Mary Maureen Brown (Ph.D. University of Georgia) is an Associate Professor at the School of Government at the University of North Carolina Chapel Hill. Brown's applied and scholarly activities focus on the use of information based technologies for re-engineering operations to improve service delivery throughout all levels of government. She has more than 15 years experience in the design, development, and implementation of advanced information technology in government organizations. In addition to her role at the School of Government, she also serves as a Visiting Scientist at the Software Engineering Institute at CarnegieMellonUniversity where her work focuses on forecasting the costs and risks of systems integration. She also serves as a Senior Fellow with the Center for Excellence in Municipal Management at GeorgeWashingtonUniversity where she provides instruction and consultation to senior federal and state officials on the adoption and implementation of advanced technologies.

Bill Anderson (Software Engineering Institute, Integration of Software Intensive Systems)has a career long focus on process improvement and technology management. A former Vice President for a Fortune 500 company, Bill is broadly experienced with factory floor and business; processes, support systems, automation, and management. He is a large system project manager that has successfully led operational, financial, product line, and new product launch groups. As a senior member of the SEI technical staff, Bill’s research interests include integration and interoperability of complex software systems, COTS and reuse management, and business case justification of complex systems.

Robert Jones: Bio to be supplied.