Appendix A Affordability Management Tenet Definition Table Tenet Number Title Level 1 Level 2 Level 3 Level 4 Level 5 1 Understanding the Understanding of values and needs is derived from program documentation (e.g., ORD, O&O, SOO, spec, etc). Contact is encouraged to clarify these documents. Understanding of values and needs is derived from program documentation and minimal interaction with customer program acquisition personnel. No direct contact with users results in a basic of program needs. Understanding of values and needs is derived from program documentation, interaction with customer program acquisition and some contact with users. Project team has solid understanding of the customer's acquisition values and a good of users' needs. Understanding of values and needs is derived from program documentation and significant interaction with customer program acquisition personnel and users. Project team all values and needs. Project team also has basic understanding of external elements the program (e.g., political, international, system-of-systems view). Project team has defined and fully understands values and needs. All customers, users, and external influences have been identified and were engaged early in the project process. Project team and customer has resulted in beneficial adjustments to the program prior to
2 PTW Process and Technical Approach Business Development is solely responsible for developing the PTW based on market perceived customer funding and desires, and product familiarity. contact occurs with the technical staff prior to actual proposal writing. A multi-functional team led by Business prepares the PTW based on market analyses, perceived funding and and product Resources are in place for engineering and cost analysts to become involved pre-proposal to fine-tune the PTW. A multi-functional team led by Business prepares the PTW based on market analyses, perceived funding and product familiarity and cost iterations. are in place for engineering and cost analysts to iterate toward the PTW value The technical approach is validated by engineering pre-proposal. A multi-functional team led by Business prepares the PTW based on market analyses, perceived funding and product familiarity and cost iterations. are in place for engineering and cost analysts to iterate toward the PTW value The technical approach is validated by engineering pre-proposal. Risk and sensitivity are included to potential pitfalls with decisions and the threshold of A multi-functional team led by Business prepares the PTW based on market analyses, perceived funding and product familiarity and cost iterations. The market analysis includes extensive studies to the goodness of competitors’ capabilities. Resources are in place for engineering and cost analysts to iterate toward the PTW value The technical approach is validated by engineering pre-proposal. Risk and sensitivity are included to potential pitfalls with decisions and the threshold of
3 Requirements Flexibility Requirements are met during the execution of a program. While some may be shown to cause cost growth, there is not a documented procedure for challenging the The leads program managers to satisfy at all times. A plan to develop the process to define notional "threshold" and "goal" values for requirements (as appropriate) is Dialogue is between program management and the customer/user to enter into requirements tailoring based on trade that address cost drivers (Tenet 6). reluctance to relax requirements is noted. The process to define notional "threshold" and "goal" values for (as appropriate) is being applied to a limited extent. Dialogue is (although not required) between management and the customer / user to enter into requirements tailoring based on trade that address cost drivers (Tenet 6). program managers for surfacing change to Customer/user reluctance to relax is noted. The process to define notional "threshold" and "goal" values for (as appropriate) is being applied across all programs. Dialogue is required between management and the customer/user to enter into requirements tailoring based on trade that address the cost drivers (Tenet 6). program managers for surfacing change to Customer/user reluctance to relax is strongly challenged. Customer and user "threshold" and "goal" values to allow identification of optimal alternatives. Customer, user and contractor discuss and relax requirements based on sound trade studies. rewards program for successful change that have been surfaced to customer / user. performance
4 KPPs and Customer and user are aware of specification guidance (MIL-STD-967) to numbers of KPPs and fixed constraints. A plan to identify overly constrained problems that may provide insight into overly constrained and KPPs is formulated. The optimal solution of reducing the numbers of constraints is introduced to the on a case–by- case basis. Customer/user is encouraged to consider and reveal to the what may be absolute, rigid requirements The plan to identify overly constrained problems that may provide insight into overly constrained and KPPs is applied to a limited extent. Costs of requirements are to be calculated and the benefits in the optimal solution approach can be shown. Customer/user is expected to consider and reveal to the contractor what may be unwritten absolute, rigid and show a to limit these. The plan to identify overly constrained problems that may provide insight into overly constrained and KPPs is applied across all programs. Costs of requirements are calculated for the most part and the benefits of the optimal solution are clearly Customer/user is engaged in limiting unchangeable, fixed including those that may be unwritten. Customer, user and are actively in limiting numbers of KPPs and fixed to allow best opportunity for optimal solution. Cost of is available for consideration by the team.
5 Cost of Cost and requirements are managed to the level. However, no attempt is made to map the two and for cost is not done. Cost and requirements are allocated to a level and mapped to the program WBS. Cost and requirements are allocated to a level and mapped to the program WBS. Cost of requirements is and used to requirements for cost. Prioritized cost of is used as a tool to separate true versus and to solutions at the system (not subsystem) level. Prioritized cost of is used to establish firm and to minimize implementation of Lessons learned and insights are provided to the The enterprise facilitates use of these findings on other 6 Cost Drivers Identification of cost occurs during execution. the interdependency of cost and requirements is not clearly known or quantified. Cost drivers are and ranked Sensitivity are performed to determine relative cost sensitivity of the driving requirement, technology, and schedule. Cost drivers identified early. Cost influences tied to requirements, technology, and schedule as appropriate. Risk identified and managed based on identified Cost drivers identified early. Cost influences are quantified. Risk and opportunity strategies are identified. Program resources are tailored to best balance technical, cost, schedule, and risk mitigation Cost drivers identified early. Cost influences are quantified. Risk and opportunity strategies are identified. Resources are applied. Lessons learned and insights are provided to the enterprise for benefit to other
7 Cost Targets Costs are arbitrarily set at the system and major subsystem level. No feedback from IPTs to validate cost targets. Design trade studies quantify system and subsystem costs product development. Program management adjusts funding between IPTs using an "equal pain" approach to meet targets, and uses the management reserve as a last measure to meet funding shortfalls. Costs are set at the and major subsystem level using data from a cost database. No from IPTs to cost targets. management measures to track costs. Design trade quantify system and major subsystem costs during product Program uses measures to adjust funding between IPTs to meet targets, and uses the management reserve as a last measure to meet funding shortfalls. Costs are set at the and major subsystem level using data from a cost database. IPTs validate cost targets with bottom-up feedback. Program management establishes measures to track costs. Design trade studies quantify system and major subsystem costs during product Program management uses measures to adjust between IPTs to meet targets, and uses the management reserve as a last measure to meet funding shortfalls. Costs are set at the and major subsystem level using data from a cost database. IPTs validate cost targets with bottom-up feedback. Program management establishes measures to track costs. IPTs work within an assigned "trade space" to develop Design trade quantify system and major subsystem costs during product Program uses measures to adjust funding between IPTs to meet targets only when an IPT has an assigned trade space without a viable product. Program management uses the management reserve as a last measure to meet funding shortfalls. Aggressive target costs are set prior to or during proposal phase. Cost targets carry over into contract execution. Cost targets are allocated to the lowest level. Cost targets provide for design tradeoffs. Cost targets are clearly owned at an appropriate level of the organization. Reasonableness of target costs is measured against cost database and program definition parameters. Current cost baseline clearly visible to appropriate program personnel. Cost targets and current assessments tracked on a regular back
8 Architecture and Cost Cost baselines are using a few but may vary from program to program. The enterprise does not process or guidance. Cost baselines processes are well documented in standard procedures. Multiple baselines development techniques are and provided by the enterprise. Cost baseline is reviewed by the enterprise when completed. Feedback loops are established between the reviewers and the baseline creators. Cost Baseline training is provided by the enterprise for all program managers. Cost baseline development templates are provided by the enterprise. Tools/models are and provided by the enterprise. Customer requirements are the cost baseline. As a matter of practice, cost baselines are early in a life cycle and reflect a convergence of top-down and bottom-up estimating techniques. Most cost based on of estimates is also used. Reconciliation involves assumptions, risks and areas to be explored for future cost reduction activities. The cost baseline is cascaded from top-level targets to lower sub-tiers mapping to the WBS and traceability to the WBS, MEL, organization and structure for the cost modeling and estimating toolset all cost baseline needs.
9 Subcontractor Involvement Subcontractors are cost and targets. Design engineers and management see that these targets are being met during the execution of the Subcontractors are cost and targets using a cost and performance database. validate cost and performance targets prior to buy-in. Design and subcontract management see that these targets are being met during the execution of the subcontract. Subcontractors are cost and targets using a cost and performance database. validate cost and performance targets prior to buy-in. Program and management establish measures to track Design engineers and subcontract see that these targets are being met during the execution of the subcontract. Subcontractors are cost and targets using a cost and performance database. validate cost and performance targets prior to buy-in. Program and management establish measures to track Design engineers and subcontract see that these targets are being met during the execution of the subcontract. are active during program reviews. Subcontractors are to the Affordability Management Process. Subcontractors are cost and targets using a cost and performance database. validate cost and performance targets prior to buy-in. Program and management establish measures to track Design engineers and subcontract see that these targets are being met during the execution of the subcontract. are active during program reviews.
10 Rewards Rewards are based solely on the enterprise’s reward system that recognizes outstanding individual and team effort. Individual programs an enterprise establish a rewards program that is extended beyond the normal enterprise reward system to account for implementation of “best value” solutions within the bounds of affordability. Individual and team awards are available. Best features of individual programs’ reward institutionalized at enterprise level to reward employees and for implemented “best value” solutions within bounds of Individual and team awards are available. Reward program at enterprise level to reward and subcontractors for implemented “best value” solutions within bounds of affordability. Individual and team are available. Customer and user are encouraged to recognize and reward their in programs. Reward program at enterprise level to reward and subcontractors for implemented “best value” solutions within bounds of affordability. Freely contributed and/or ideas are eligible for some lower level reward. Individual and team rewards are available. Customer and user actively participate in the rewards program through appropriate means.
11 Continuous Cost Reduction Continuous cost suggestions and ideas occur on a random basis. Continuous cost suggestions and ideas are encouraged through Design to Value (DTV) training. On a subset of enterprise programs, continuous cost reduction and ideas are of program on a regular basis. Some program-specific reward program may be in place. On most of an programs, cost reduction and ideas are expected of program personnel on a regular basis. The enterprise has instituted a rewards from the best of program-specific rewards programs (Tenet 10). Continuous cost is an in-bred practice in the enterprise. Less expensive ways to customer or user requirements are regularly recommended and implemented. The enterprise has a program that rewards suggestions and ideas (Tenet10).
12 Life Cycle Costs and the Trade Process Ad hoc trade studies are performed but there is neither a standard nor a method of assigning responsibility. A process for performing trade studies is and documented at the program level. Trade studies are conducted on a program-by-program basis. Responsibility is assigned and studies are managed at the program level. A standardized trade study process is defined and managed at the level. The process can be tailored from the set of standard practices for each under guidelines specified within the Deviations beyond those allowed by tailoring guidelines are justified, reviewed and approved. Measures are assigned to the standardized trade study process such that adherence to the process is Measures can consist of the number of trade studies performed on a program, the of options considered in each trade, cost realized resulting from each trade, cost performance index (CPI) and schedule index (SPI) trend analysis, etc. Programs are quantitatively and statistics are logged for program Standard procedure for trade study management is in place and expected to be followed. trade study approach is part of the design process training. Standard trade study formats, derived from standard procedure, are followed within each Oversight of the trade study process is assigned at the enterprise level, along with the keeping measures for all programs. The measures are analyzed at the level, and fed back to the programs for optimization of the trade study process. An repository of trade study findings is available for the benefit of all
13 Cost Database and Its Usage Historical cost data are available but difficult to find and use. Greater use is made of parametric and program unique data. The enterprise has not assigned historical cost data maintenance. In each program, the WBS has been crafted to allow easy accumulation of labor cost and product cost data. Labor cost and cost data are electronically available from labor charging and can be parsed and imported into simple office automation The enterprise has assigned historical cost data planning and to a single functional organization. Programs continue to use the WBS to accumulate and make cost data available electronically. The enterprise-assigned functional organization has defined requirements for an historical cost and requirements for kinds of costs and effort measures that will be tracked. A plan is in place for improving parametric cost models with data and factors. Programs continue to use the WBS to accumulate and make cost data available electronically. Effort has expanded to capture program costs across all phases. parametric cost models have been customized and to reflect program actuals, rather than averages. The enterprise-wide functional organization has a plan for currency. historical cost data is used to develop cost estimates. The historical database is continuously expanded. The enterprise-assigned functional organization creates, maps, updates and disseminates cost data.
15 Constraint /Risk Identification and Risk identification and management are applied to programs according to enterprise standard Constraints are identified and managed as appropriate. Risk and constraint and management are extended beyond the enterprise standard to address optimal solutions. However, risk remains program focus. Risk and constraint and management are an integral part of cost-performance trades. Acceptance of risk may occur on a case-by-case basis. Risk and constraint and management are an integral part of cost-performance trades. Acceptance of risk may occur on a case-by-case basis. Risk tolerance guidance is beginning to surface in the enterprise’s program leadership training. Risk and constraint and management are an integral part of cost-performance trades. Acceptance of risk occurs on all programs to enable solutions. Risk tolerance guidance is a critical element of the enterprise’s program leadership training.
18 Selection and Optimization Selection and of a system is at the subsystem level. The system a "roll up" of the subsystems that meet allocated costs and Costs, schedule and risk are monitored on a regular basis. A plan to develop a selection and methodology that balances cost, schedule and risk has been formulated. A procedure to direct the tradeoff process that assesses multiple, factors and their impact on affordability and LCC has been initiated. Costs, performance, schedule and risk continue to be monitored and applied to developing utility factors, as appropriate. The plan to develop a system selection and optimization methodology that balances cost, schedule and risk has been initiated and is being practiced to a limited extent on pilot programs. A procedure to direct the tradeoff that assesses interrelated factors and determines their impact on affordability and LCC has been and documented. Costs, performance, schedule and risk to be monitored and applied to developing utility factors, as for system The plan to develop a system selection and optimization methodology that balances cost, schedule and risk is complete and to most programs. The tradeoff process that assesses multiple, factors and their impact on affordability and LCC is defined and documented in enterprise procedures. Costs, performance, schedule and risk to be monitored and applied to developing utility factors and weighting factors, as appropriate, for system optimization. A system selection and optimization methodology that balances cost, schedule and risk has been developed and is applied to every program. The tradeoff process that assesses multiple, interrelated and determines their impact on affordability and LCC is defined and documented in enterprise procedures. Utility and weighting are used to optimize the system in this process based on collected costs, performance, schedule, and risk data.
19 Cost Reviews Cost reviews occur at the program level in with normal program review events and are usually "statusing" events. review of costs occurs for programs with cost "problems". Cost reviews occur at the program level in with normal program review events and are detail-oriented events. review of costs occurs for programs with cost A dedicated cost control person is to the program. and program-level cost reviews are required at regularly scheduled beyond the normal program reviews. are required on a weekly or biweekly basis. A dedicated cost control person is assigned to all programs. and program-level cost reviews are required at regularly scheduled beyond the normal program reviews. are required on a weekly or biweekly basis. A dedicated cost control person is assigned to all programs. Cost plans for cost items are required. Cost review procedures policies are well documented and included in the program manager’s guide. Earned Value Management are established to facilitate the cost review process. and program-level cost reviews are required on a weekly basis for all including IR&D and company-funded activities. For programs with an IPT structure, cost issues are regularly addressed at IPT Cost control are assigned to all programs and IPTs within programs. Cost plans for cost items are required. Cost review procedures policies are well documented and included in the program manager’s guide. Earned Value Management are established to facilitate the cost review process. Subcontractors are included in cost reviews.
20 Affordability Measures Performance, cost, schedule and risk are tracked program by but no standard exists by which to and measure them. No automated tools are used to track these Performance, cost, schedule and risk are tracked program by Standards are developed to establish a common format. No automated tools are used to track data. Key performance, cost, schedule and risk are selected and tracked program by Standards are developed to establish a common format. No automated tools are used to track data. Key performance, cost, schedule and risk are selected and tracked program by Standards are developed to establish a common format. tools are used to track data. A standard procedure for identifying and tracking Affordability measures is in place. Key cost, schedule and risk parameters are selected and tracked program by program. Standards are developed to establish a common format. Automated tools are used to track data.