Making the Right Decisions at the Right Time

Making the Right Decisions at the Right Time Kristen Burnham Director, Investment Planning & Analysis FAA Acquisition Excellence Summit June 14, 2010 Federal Aviation Administration -1 - 1

Setting the Scene—Investment Analysis in 2010 • We are transitioning from legacy to Next. Gen • The NAS Enterprise Architecture is our best overall vision of Next. Gen, but it is mostly unconstrained • Our budgets are constrained (and likely to become more so) • We are attempting to make 50+ major investment decisions annually, about 5 times more than “normal” • The maturity of program requirements varies greatly – Need to balance near-term problems with longer-term Next. Gen solutions • Program and capability dependencies abound but are not fully understood • Tensions swirl around the question of priorities • The need for business cases is reinforced in external discussions (with government oversight agencies, airlines/industry, and international entities). Federal Aviation Administration -2 - 2

Expectations—Investment Analysis in 2010 In this context, we expect many things from investment analysis: – – – – It will move faster It will show the value of individual investments It will drive decisions It will move faster It will show the value of portfolios and their components It will illustrate risk and areas for oversight It will not be too onerous It will move even faster Federal Aviation Administration -3 - 3

Narrowing the Gap—Investment Analysis in 2010 What are we doing to get closer to these expectations? • Tailoring level of effort according to ACATs • Refocusing investment analysis teams on the basic, substantive questions • Working with programs to segment decisions when needed • Make decisions to address near-term needs… • While better defining longer-term requirements • Greater IP&A activism and leadership to crystallize and elevate issues • Taking issues forward when we “know enough” Federal Aviation Administration -4 - 4

Narrowing the Gap—Investment Analysis in 2010 What are we doing, cont…. • Improving collaboration with sister organizations • Systems Engineering, ABA, internal Finance, AEB, etc. • Strengthening career paths • Certification program and training for cost estimators • Providing better tools and guidance • New web site on its way • Updated investment analysis policy and guidance • Hiring and training • Bringing in the right expertise from inside and outside the agency Federal Aviation Administration -5 - 5

Today’s Themes • Investment Analysis: Sharpening the Philosophy • ACATs and the Business Case: Turning Philosophy into Action • Collaboration: The Key to Efficiency (and Oversight) • People and Tools: Stepping It Up Federal Aviation Administration -6 - 6

Investment Analysis: Sharpening the Philosophy Federal Aviation Administration -7 - 7

Sharpening the Philosophy Creating a business case culture – Historically, “business case” has described a document associated with a box that needs checking – The business case should be the primary vehicle to ensure the FAA makes the right decision at the right time – Need to establish a culture in which value to the aviation community is paramount Federal Aviation Administration -8 - 8

Sharpening the Philosophy Getting back to basics: • What is the problem that needs to be solved? • What is the range of alternatives that could address this problem? • What are the costs, benefits, and risks associated with each alternative? • Based on the above, what is the recommended course of action? Federal Aviation Administration -9 - 9

ACATs and the Business Case: Turning Philosophy into Action Federal Aviation Administration - 10

Turning Philosophy into Action • Acquisition categories take us away from one-size-fits-all • Investment analysis is now pre-tailored according to the size, complexity, and sensitivity of the investment • Additional tailoring will be discouraged • These changes give us all better odds of addressing the workload, without diminishing the decisions Federal Aviation Administration - 11

Business Case Requirements—Initial Investment Decision ACATs 3/4/5 do not require Monte Carlo simulation for risk analysis ACATs 3/4/5 do not require probabilistic economic analysis at the 80% confidence level ACATs 4/5 do not require schedule analysis beyond that found in the ISPD. ACATs 4/5 (Tech Refresh/Replacement in Kind) do not require Initial Investment Decision. Federal Aviation Administration - 12

Business Case Requirements—Final Investment Decision ACAT 4/5 require full risk-adjusted LCCE to WBS Level 2 (not Level 3) ACAT 4/5 do not require Monte Carlo risk analysis ACAT 4/5 do not require schedule analysis beyond that found in the ISPD ACATs 4/5 (tech refresh) requires NPV or payback analysis rather than a full economic analysis Federal Aviation Administration - 13

Collaboration: The Key to Efficiency (and Oversight) Federal Aviation Administration - 14

Collaboration In this context, working across organizations and strengthening relationships is not optional: • Filling in holes • Eliminating overlaps • Teaming to refine the big picture (Next. Gen segments, potential portfolios, etc. ) • Teaming to elevate and address hard questions • Teaming to find the right “path” for each program Result is greater efficiency AND better oversight. Federal Aviation Administration - 15

Collaboration--Examples • Capital Investment Team – Focused on formulation and ad hoc program reviews – De-conflicted with investment analysis “gates” • CFO (ABA) contract reviews – Single review process, joint business case • Systems Engineering – Supported development of guidance documents and templates • Program Offices – Weekly Status Update • Intra-Finance coordination strengthened – Formulation and performance leads involved in IA reviews • Workforce Development – Certification and training initiatives • Next. Gen Integration & Implementation – Teaming on Segments A, B, etc. , to anticipate needs Federal Aviation Administration - 16

People and Tools: Stepping It Up Federal Aviation Administration - 17

People • Strengthening Career Paths • Certification Program for Cost Estimators • Competency Model • Curriculum Development • Hiring and Restructuring • Asserting collaborative model • Challenging expectations Federal Aviation Administration - 18

Tools Web Site Demonstration Federal Aviation Administration - 19

“The [ ] is a pantheon of values, and a lot of hard cases are hard because the [ ] gives no simple rule of decision for the cases in which one of the values is truly at odds with another. ” Justice David Souter, Harvard Commencement Address, 27 May 2010 Federal Aviation Administration - 20