European Aerospace Working Group On Cost Engineering Capability

European Aerospace Working Group On Cost Engineering Capability Improvement Model (CECIM) Working Group Session 17 th April 2002 Dave Lewis & Hugh Pickerin © Dave Lewis & Hugh Pickerin 1

CECIM Objectives © Dave Lewis & Hugh Pickerin 2

WHY CECIM? ? • To provide a WG Deliverable that will – Improve the profile of Cost Engineering by • Describing the CE Body Of Knowledge • Provide an identity for the domain & for cost engineering practitioners themselves. © Dave Lewis & Hugh Pickerin 3

CECIM Objectives • To encourage the application of bestpractice methodologies & techniques amongst participants – Business Improvement Model • To define scope of Cost Engineering • To define the competences and functions that comprise cost engineering © Dave Lewis & Hugh Pickerin 4

Why “CECIM”? CECIM = (Cost Engineering) + (Capability Improvement Model) = (better value)+ (better effectiveness) © Dave Lewis & Hugh Pickerin 5

“The Purpose of CECIM” • CECIM offers a means by which organisations can assess their current CE capability and so determine what actions need to be taken to improve their capabilities • For organisations without a formal approach to CE, it provides a means of becoming familiar with the activities that constitute best practice. © Dave Lewis & Hugh Pickerin 6

“The Purpose of CECIM” • CECIM provides a means to evaluate an organisations capability. It provides a 6 step ladder, as a means of defining and quantifying process improvement • It can be used in total or in part, depending on organisational needs • Higher Levels may not always be justified: too expensive for some organisations? © Dave Lewis & Hugh Pickerin 7

CECIM Architecture © Dave Lewis & Hugh Pickerin 8

CECIM Architecture © Dave Lewis & Hugh Pickerin 9

The Domain Portion - “What Should The Organisation Be Doing? ” Defines the processes of the CE discipline related to: – The discipline itself; – Integration within the project; – Organisation-wide processes. Decomposes the discipline into “Process Areas” (PAs). – Decomposes the PAs into “Base Practices” (BPs). © Dave Lewis & Hugh Pickerin 10

The Capability Portion – “How Well Is It Performing? ” • Defines 6 increasing levels of process maturity • Defines Generic Practices for each Capability Level © Dave Lewis & Hugh Pickerin 11

Domain + Capability = Maturity © Dave Lewis & Hugh Pickerin 12

CECIM Model Contents Unique Domain Portion: • 19 Process Areas. • 101 Cost Engineering BPs defined • Typical Work Products identified for each BP. • Links between BPs established Domain portion architecture follows SEI format Generic Capability Portion: • features 5 Capability Levels (plus level 0). • comprises 28 common features & generic practices. Capability portion adopts standard PI definitions (e. g. SEI) © Dave Lewis & Hugh Pickerin 13

Development Process © Dave Lewis & Hugh Pickerin 14

Development Process Step 1 Develop Process Areas Identify Links Step 4. 3 Step 2 Step 3 Develop Purpose Statements Develop Base Practices Develop BP Outputs Develop Base Practice Descriptions Step 4. 2 © Dave Lewis & Hugh Pickerin Step 4. 1 15

Step 1 – Develop Process Areas • • • Cost Estimating Cost Modelling Cost Control & Analysis VA/VE & Cost Reduction Planning Risk Management Competences Management Define Process Improve Process • Integrate Disciplines • • • Ensure Quality DTC & CAIV Supply Chain Knowledge Management Capital Asset & Resource Management Business Analysis Business Case Development Audit Cost Allocation © Dave Lewis & Hugh Pickerin 16

Step 2 – Develop Purpose Statements • Example. The purpose of Cost Estimating is to determine and communicate a realistic view of the likely cost outturn, which can form the basis of the ongoing plan for the execution of the work. Cost estimating requires that a detailed understanding of the scope of work is performed with each project objective clearly identified and accounted-for in the estimating process. Cost estimating includes estimating the impact of lessons learned, risk assessment, currency calculations & presentations to senior management. Before cost estimating is commenced, it is important to fully understand the class of the estimate required & tailor the process accordingly. © Dave Lewis & Hugh Pickerin 17

Step 3 – Develop Base Practices e. g For Cost Estimating • Understand customer needs • Classes of estimates • Develop metrics • Create WBS, OBS, PBS, CBS • Generate Target costs • Determine preliminary schedule • Generate make/buy plan • Obtain material costs • Generate detailed estimates for in house work • Agree foreign exchange rates • Compile Works cost • Calculate Contingency • Utilisation of learning curve • Issue definitive estimate © Dave Lewis & Hugh Pickerin 18

Step 4. 1 – Develop Description for BPs e. g For Understand Customer Requirements. Analyse request from customer, internal or external, including all requirements, specifications etc associated with the request. Contact relevant people to ensure clear understanding and documenting of the needs, statement of work etc. Prior to commencing any estimating activity, establish and agree the level or class of estimate (see BP 02) and ensure that all parties are aware of the commercial considerations (i. e. contract pricing instructions). © Dave Lewis & Hugh Pickerin 19

Step 4. 2 – Develop Description for BPs e. g. Typical Work Outputs: · Basis of Estimate (BOE) · Hardware and Verification Matrix · Preliminary Design and Development Plan · Industrial Plan • Contract pricing instructions (e. g. Fixed, Firm-Fixed etc. ). © Dave Lewis & Hugh Pickerin 20

Step 4. 3 – Develop Description for BPs Add links e. g Note: The level to which the customer requirements can be determined will identify inputs to the “weak points” in risk identification (PA 06/BP 01) and determine the confidence level in the estimate being generated (PA 01/BP 02). © Dave Lewis & Hugh Pickerin 21

Next Steps • Survey Results today • Correspondence, particularly comments leading to future improvement of the CECIM are welcome to – Costeng@hotmail. com – hpickerin@anangle. com • http: //www. anangle. demon. co. uk/eace/products. htm © Dave Lewis & Hugh Pickerin 22

Copyright Permission: The EACE wish to acknowledge the prior work performed under the auspices of the Systems Engineering Institute at Carnegie Mellon University. To use the general CMM architecture, utilise the Capability definitions, reproduce Figures and adapt Process Areas 06, 08, 09, 10 and 11 royalty-free (these portions Copyright © 1995 by Carnegie Mellon University). CMM and Capability Maturity Model are service marks of Carnegie Mellon University © Dave Lewis & Hugh Pickerin 23

Supplementary Viewgraphs © Dave Lewis & Hugh Pickerin 24

PA: 02 Cost Modelling • • Preliminary Model design Identify system information requirements Data Collection Data Analysis Develop Models Calibrate and validate models Model Maintenance © Dave Lewis & Hugh Pickerin 25

PA: 03 Cost Control & Analysis • • Establish Requirements Confirm WBS Revise Estimate Establish Baseline(BCWS) Collect Costs Performance Measurement(Including EVA) Estimate to Completion Assimilation of Lessons Learned © Dave Lewis & Hugh Pickerin 26

PA: 04 VA/VE & Cost Reduction • • • Gather Information Consider Alternatives Analyse Alternatives Develop Proposals Implementation © Dave Lewis & Hugh Pickerin 27

PA: 05 Planning • • Establish Requirements Confirm WBS Preliminary Schedule Critical Path Analysis Set Target Schedules Schedule Status Lessons Learned © Dave Lewis & Hugh Pickerin 28

PA: 06 Risk Management • • • Risk Identification Risk Analysis Financial Quantification Risk reduction planning Risk monitoring & control © Dave Lewis & Hugh Pickerin 29

PA: 07 Competence Management • Identify needed improvements in skills & knowledge • Evaluate & select appropriate mode of acquiring knowledge & skills • Prepare training manuals • Train personnel • Maintain records of training & experience © Dave Lewis & Hugh Pickerin 30

PA: 08 Define Organisations Cost Engineering Process • Establish goals for the organisation cost engineering process • Develop a well defined standard cost engineering process • Define guidelines for tailoring the standard process for special situations © Dave Lewis & Hugh Pickerin 31

PA: 09 Improve Organisation Cost Engineering Process • Appraise Strengths & Weaknesses of the Existing Process • Plan Improvements • Communicate Process Improvements to Affected Groups © Dave Lewis & Hugh Pickerin 32

PA: 10 Integrate Disciplines • Involve the Disciplines that are Essential to Successful Cost Engineering • Establish methods for interdisciplinary co -ordination • Develop and Communicate Goals • Communicate Results © Dave Lewis & Hugh Pickerin 33

PA: 11 Ensure Quality • Ensure Defined Process is Adhered to • Measure the Quality of the Cost Engineering Process • Analyse Quality Measurements to Develop Recommendations for Quality Improvement • Initiate Activities that Address Identified Quality Issues or Quality Improvement Opportunities © Dave Lewis & Hugh Pickerin 34

PA: 12 Design To Cost & CAIV • Understand mission goals. Affordability, engineering & management plans • Identify candidate solutions • Cost/performance/schedule/risk trade studies • Refine mission requirements to meet cost constraints • Track progress during project life cycle © Dave Lewis & Hugh Pickerin 35

PA: 13 Supply Chain Management • • Prepare make/buy plan Issue RFO’s Review supplier quotes Select supplier Analyse & negotiate claims & changes Approve invoices & milestone achievement Close out © Dave Lewis & Hugh Pickerin 36

PA: 14 Knowledge Management • Identify strategic knowledge needs and assets • Mobilise and capitalise assets • Identify and implement mechanisms for knowledge capture and retention © Dave Lewis & Hugh Pickerin 37

PA: 15 Capital Asset & Resource Management • • • Obtain resource requirements Probabilistic analysis on future projects Manage resource requirements Review resource requirements Initiate plan to cover shortfalls © Dave Lewis & Hugh Pickerin 38

PA: 16 Business Analysis • • Monitor efficiencies Benefits tracking and analysis Identify profitable business Overheads forecasting © Dave Lewis & Hugh Pickerin 39

PA: 17 BUSINESS CASE DEVELOPMENT • Market analysis • Financing scheme analysis • Compilation of the business plan © Dave Lewis & Hugh Pickerin 40

PA: 18 AUDIT • • • Agree approach to audit Review estimating process Carry out audit Negotiate findings Implement agreement © Dave Lewis & Hugh Pickerin 41

PA: 19 Cost Allocation • Decide basis of direct and indirect allocation • Establish cost that are compatible with direct and indirect allocation • Publish cost allocation • Apply cost allocation to the estimating process © Dave Lewis & Hugh Pickerin 42