# Presentation: 186722

## 2004 NASA COST ANALYSIS SYMPOSIUM“Cost Analysis: Launch Pad for One NASA”9 March 2004

_**Cost-Risk Analysis Panel**_
- David R. Graham (Moderator)
- Tim Anderson (Aerospace)
- Dr. Steve Book (MCR)
- Paul Garvey (Mitre)
- Joe Hamaker (NASA)
- Don MacKenzie (Wyle Labs)

## NASA Cost-Risk Analysis Panel

- Theme of panel is 12 Tenets of NASA Cost Risk
- Product of Oct NASA Cost-Risk Policy Development meeting
- Reps are here as panel members
- Cover 8 of 12 Tenets
- 4 remaining Tenets covered by Dave Graham are:
- Cost-risk is a sub-part of cost estimating - both of which are project management support
- Cost-risk assessment is a joint eng/estimator activity
- Cost-risk integrates quantification of cost and schedule risk
- Establishment of a NASA cost-risk database

## THE 12 GENERAL TENETS OF NASA COST-RISK

_** **_

**NASA cost-risk assessment, a subset of cost estimating, supports cost management for optimum project management;**
**NASA cost-risk assessment is based on a common set of risk and uncertainty definitions;**
**NASA cost-risk assessment is a joint activity between engineers and cost analysts;**
**NASA cost-risk assessment is composed of cost estimating relationship (CER) and technical risk assessment plus cost element correlation assessment; **
**5.     NASA technical cost-risk assessment combines both probabilistic and discrete technical risk assessments;**** **
**NASA cost-risk probability distributions are justifiable and correlation levels are based on actual cost history to the maximum extent possible; **
**NASA cost-risk assessment ensures cost estimates are “likely-to-be” vice “as specified” for optimum credibility;**
**NASA cost-risk assessments account for all known variance sources and include provisions for unknown unknown sources;**
**NASA cost-risk can be an input to every cost estimate’s Cost Readiness Level (CRL);**
**NASA cost-risk integrates the quantification of cost-risk and schedule risk;**
**NASA decision makers need to know: **
**How much money is in the estimate to cover risk events; **
**To which WBS elements are they allocated; and,**
**The likelihood of an overrun;**
**NASA project cost-risk data is compiled into a cost-risk database. **

## Tenet #1

- NASA cost-risk assessment, a subset of cost estimating, supports cost management for optimum project management
- Provides the Project Manager a cost assessment of the areas of the effort most likely to drive cost-growth
- Identifies cost performance measurement targets for tracking (e.g., EVM) to provide feedback to the Project Manager
- “Triggers” management reserve actions, cost/performance trades

## Tenet #3

- NASA cost-risk assessment is a joint activity between engineers and cost analysts
- Elicit risk information in a form she can translate into cost impacts
- Discussions can take the form of interviews about the risks in a given WBS element and how *relatively risky *that WBS element’s worst case (pessimistic), best case (optimistic) and most likely case (reference) scenarios are
- Preferred to have more than one engineer in the assessment due to the discussions that naturally evolve
- Identify discrete risks in Key Engineering Performance Parameters (KEPPs)

## Tenet #10

- NASA cost-risk integrates quantification of cost-risk and schedule risk
- Risk Path Analysis will be performed along with traditional Critical Path Analysis (CPA)
- Adding the dimension of duration uncertainty to activities, along with traditional early start/late start - early finish/late finish, results in more realistic CPA
- Compare/combine cost-risk affects of schedule risk with traditional (e.g., risk template-based) cost-risk impact assessment

## Tenet #12

- NASA project cost-risk data is compiled into a cost-risk database containing:
- Beginning-of-contract cost and schedule estimates and actuals
- End-of-contract cost estimates and actuals
- “S”-curves from significant contract milestones
- Technical risk-driven and external risk-driven cost and schedule growth documentation
- Probabilistic risk assessments
- Risk management plans and results
- Medium and high risk WBS element earned value performance measurement results
- Documentation of all engineering technical risk assessment methodologies used in assessing cost-risk
- Technical data