Modeling the Effect of Budget Constraints          on Cost and Schedule                                NASA 2012 PM Challe...
Outline/Agenda Background Modeling Techniques Summary PRT#115 22 February 2012   Approved for Public Release           ...
Evolution of Cost/Schedule                                                          Understanding     Implementation of c...
Our Reality is an Integrated System;                           Where Budget Availability is a Major InputPRT#115 22 Februa...
Several Tools Have Recently Been Developed    to Assess Impact of Funding Constraints     Tool 1: Deterministic Based App...
Modeling the Effect of Budget Constraints on Cost and Schedule   DETERMINISTIC ANALYSISPRT#115 22 February 2012    Approve...
Deterministic Analysis Model Purpose: Provide program managers and resource   analysts the ability to assess the effect t...
Model Overview The model attaches Time-Independent (TI) and Time-    Dependent (TD) costs to schedule elements         T...
Model Overview                                                                                           Named      Schedu...
Example Analysis: Baseline Case Four budget elements, includes series and parallel events                               S...
Example Analysis: Excursion 1               •   What if the budgets are constrained by 10% each year?                     ...
Example Analysis: Comparison Excursion has a 12% increase in cost All excursion tasks have an increased duration       ...
Example Analysis: Excursion 2    Prioritizing Task 1 allows it to finish earlier, and moves the           entire project ...
Example Analysis: Excursion 3   What if some of the budget cuts can be reallocated?   In this example, we will cause FY2...
Modeling the Effect of Budget Constraints on Cost and Schedule   COST RISK ANALYSISPRT#115 22 February 2012    Approved fo...
Current Techniques to Align Cost and Schedule                                 via Uncertainty Analysis                    ...
However, Budget Profiles Rarely Match                                Risk-Adjusted Time-Phased Estimates              $100...
The Concept Tecolote Developed a ROM-level analysis technique for NASA to    gauge the impact of budget availability on a...
General Approach for Three                                   Different ScenariosPRT#115 22 February 2012    Approved for P...
User Inputs and Controls The user has the ability to:        Select type of analysis to         conduct             Poi...
Example Case – 70% Effort                                                  Exceeds Available Budget Phased budget and poi...
Understanding the Shortfall – Work                                                                              Slips to t...
Identifying Budget Scenarios Budget Scenario Considerations        Need to be realistic            Near-term funds are ...
Example Case Results – Effort Rollover                                     Fits Under Budget Constraint     $100          ...
Modeling the Effect of Budget Constraints on Cost and Schedule   INTEGRATED COST AND   SCHEDULE RISK ANALYSISPRT#115 22 Fe...
Integrated Cost/Schedule Budget                       Constrained Reserve Phasing Model A tool is needed that accurately ...
High - Level Model Concept Schedule Activities from JCL Models (or Project Schedules) are    Mapped into Budget Organizat...
Modeling Approach – Enabling                           via Budget Organization LevelsPRT#115 22 February 2012       Approv...
Example Simple Project Model                            (5 Budget Organization Items)  BudgetEffort/Costs Schedule PRT#115...
Model in Action – What Happens When                                  Effort Exceeds Budget Availability    Organization 1 ...
Modeling the Effect of Budget Constraints on Cost and Schedule   SUMMARYPRT#115 22 February 2012    Approved for Public Re...
Summary Understanding connection between cost and schedule is of utmost   importance for estimators Available funds and ...
Thank YouPRT#115 22 February 2012     Approved for Public Release   33
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  1. 1. Modeling the Effect of Budget Constraints on Cost and Schedule NASA 2012 PM Challenge Darren Elliott – Tecolote Research, Inc. 22 February 2012  Los Angeles  Washington, D.C.  Boston  Chantilly  Huntsville  Dayton  Santa Barbara  Albuquerque  Colorado Springs  Goddard Space Flight Center  Johnson Space Center  Ogden  Patuxent River  Washington Navy Yard  Ft. Meade  Ft. Monmouth  Dahlgren  Quantico  Cleveland  Montgomery  Silver Spring  San Diego  Tampa  Tacoma  Aberdeen  Oklahoma City  Eglin AFB  San Antonio  New Orleans  Denver  Vandenberg AFBPRT#115 22 February 2012 Approved for Public Release
  2. 2. Outline/Agenda Background Modeling Techniques Summary PRT#115 22 February 2012 Approved for Public Release 2
  3. 3. Evolution of Cost/Schedule Understanding Implementation of cost risk analysis to provide a better gauge of the most likely required effort for a project  NASA established policy to fund at a target cost confidence level  Reality was that cost risk funds exceeded targeted budget levels  Led to additional analysis on best techniques for applying reserve and setting up the overall project budget Recognition that enhanced modeling was needed, as many costs are time- dependent (e.g., fixed infrastructure, program support, systems engineering) in nature  Developed methods to address costs based on time behavior (e.g., time-dependent and time- independent) Enhanced understanding hat additional costs are incurred due to schedule delays associated with alignment of work packages  Developed methodology to integrate cost and schedule risk analysis to determine the joint confidence level (percent chance of meeting both cost and schedule objectives)  NASA established policy to fund projects at a target joint confidence level Realization that funding is a major driver to schedule and total cost  Lack of budget availability stretches schedule  Currently researching and developing methods to address this problem PRT#115 22 February 2012 Approved for Public Release 3
  4. 4. Our Reality is an Integrated System; Where Budget Availability is a Major InputPRT#115 22 February 2012 Approved for Public Release
  5. 5. Several Tools Have Recently Been Developed to Assess Impact of Funding Constraints Tool 1: Deterministic Based Approach  Sponsored by NASA JSC , developed by Tecolote Research, Inc  Requires identification of major cost elements, breakdown into TD/TI behavior, and notional understanding of dependency (serial or parallel) between cost elements  Uses time-phased cost and budget information  Runs in Excel Tool 2: Cost Risk Based Approach  Sponsored by NASA HQ, developed by Tecolote Research, Inc  Requires development of a cost-risk analysis  Uses cost risk statistics, and time-phased cost and budget information  Runs in ACE or Excel Tool 3: Integrated Cost and Schedule Risk Analysis Approach  Sponsored by NASA JSC and NASA HQ , developed by Tecolote Research, Inc  Requires development of an integrated cost and schedule risk analysis, allocation of costs to schedule effort, and breakdown of cost into TD/TI behavior  Uses schedule logic, cost allocation to schedule activities, time-phasing of costs, cost and/or schedule statistics, allocation of schedule/cost effort into budget items, time-phased budget information, and can incorporate discrete threats  Runs in Excel /Crystal Ball PRT#115 22 February 2012 Approved for Public Release 5
  6. 6. Modeling the Effect of Budget Constraints on Cost and Schedule DETERMINISTIC ANALYSISPRT#115 22 February 2012 Approved for Public Release 6
  7. 7. Deterministic Analysis Model Purpose: Provide program managers and resource analysts the ability to assess the effect that budget constraints will have on a program  Requires a simple set of data  Includes estimated effect on both cost and schedule Allows for rapid simulation and comparison of different scenarios Requires cost plan for major activities/efforts and a notional understanding of major effort dependencies (e.g., serial or parallel activities) PRT#115 22 February 2012 Approved for Public Release
  8. 8. Model Overview The model attaches Time-Independent (TI) and Time- Dependent (TD) costs to schedule elements  TI cost elements: Total cost is constant regardless of duration  TD cost elements: Total cost increases as duration increases (labor rate and resources) Budget constraints reduce spending and cause the associated schedule elements to extend  Assumes a constant spend rate within each fiscal year  The spend rate is determined from the year’s constraint  TD spend rates are considered fixed, while TI spend rates are allowed to vary to fit within the constraintPRT#115 22 February 2012 Approved for Public Release
  9. 9. Model Overview Named Schedule Cost Budget Excursion Elements Elements Constraint Budget Results s Constraint Engine Results Display Engine Schedul e Element Referenc e Analyze Show User InterfacePRT#115 22 February 2012 Approved for Public Release
  10. 10. Example Analysis: Baseline Case Four budget elements, includes series and parallel events Summary Results Gantt Chart Date 10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 Task 1 Task 2 Start Date Finish Date Task 3 Task 1 10/1/2012 2/13/2016 Task 2 4/1/2013 1/25/2014 Task 4 Task 3 1/26/2014 6/18/2015 Task 4 1/26/2014 11/25/2015• Each task has an associated TI and TD cost, resulting in the following spending profile: Summary Results by Schedule Elements (Constant Year $) 250 This example assumed 200 up to $200 was available per year, as 150 Task 4 demonstrated by the $M Task 3 Task 2 black line 100 Task 1 50 0 2011 2012 2013 2014 2015 2016 2017 2018 PRT#115 22 February 2012 Approved for Public Release
  11. 11. Example Analysis: Excursion 1 • What if the budgets are constrained by 10% each year? – Because tasks will now begin slipping, it is also necessary to define constraints in the out-years beyond 2016, this example assumes funding continues at 2016 levels ($180 in this example) Summary Results Gantt Chart Summary Results by Schedule Elements (Then Year $) 200 Date 10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017 180 160Task 1 140 120 Task 4 $M 100 Task 3Task 2 80 Task 2 Task 1 60Task 3 40 20Task 4 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 Summary Results Gantt Chart - Original Budget Date 10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017 Original Duration Excursion Duration Original Cost Excursion CostTask 1 Task 1 1230 1541 $402.64 $453.18 311 day slip from Task 2 299 356 $69.35 $72.70Task 2 baseline Task 3 508 666 $57.99 $63.28 Task 4 668 874 $144.35 $170.78Task 3Task 4 PRT#115 22 February 2012 Approved for Public Release
  12. 12. Example Analysis: Comparison Excursion has a 12% increase in cost All excursion tasks have an increased duration  Task 1 has the largest increase in duration  Increases in duration correspond to increased TD costs Constraining the budget will avoid cost in those years, but the deferred work and presence of fixed costs will result in a net cost increase and schedule slip How can this information be used? Some examples:  It is apparent Task 1 is a large cost driver in the new case, prioritizing it at the expense of the other, shorter, tasks may result in a total cost savings  If the goal is a budget reduction, it may be preferable to focus the reduction on only one or two years instead of spreading it evenly These different scenarios can be run to explore the nature of the budget constraint PRT#115 22 February 2012 Approved for Public Release
  13. 13. Example Analysis: Excursion 2  Prioritizing Task 1 allows it to finish earlier, and moves the entire project back to the left Summary Results Gantt Chart Date 10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017 Task 1 Excursion 1 Finish Date Task 2 Baseline Finish Date Task 3 • Task 1’s earlier Task 4 completion frees up money for Tasks 3 and 4 • Final cost in this case: $708 Summary Results by Schedule Elements (Constant Year $) – Final cost in Excursion 1: $760 160 – Final cost in Baseline: $674 140 120 100 Task 1 $M 80 Task 2 Task 3 60 Task 4This is an example of how the tool can be 40 used to potentially optimize cost and 20 0 schedule within a budget constraint 2011 2012 2013 2014 2015 2016 2017 2018 PRT#115 22 February 2012 Approved for Public Release
  14. 14. Example Analysis: Excursion 3 What if some of the budget cuts can be reallocated? In this example, we will cause FY2013 to take most of the budget cuts, but then increase the budget in the out-years: 2013 2014 2015 2016 2017 $100.00 $200.00 $200.00 $200.00 $200.00 Summary Results Gantt Chart Date 10/1/2012 10/1/2013 10/1/2014 10/1/2015 9/30/2016 9/30/2017 Task 1 Task 2 Task 3 Task 4• This example finishes at nearly the same time as the original excursion – Total cost reduced to $743, compared to the excursion 1’s $760PRT#115 22 February 2012 Approved for Public Release
  15. 15. Modeling the Effect of Budget Constraints on Cost and Schedule COST RISK ANALYSISPRT#115 22 February 2012 Approved for Public Release 15
  16. 16. Current Techniques to Align Cost and Schedule via Uncertainty Analysis Total - Cost Estimate Uncertainty Analysis Results BY2010 $M 100.0% 4.5% 90.0% 4.0% 80.0% 3.5% Probability (Histogram) 70.0% Confidence Level (CDF) 3.0% 60.0% 2.5% 50.0% 2.0% 40.0% 1.5% 30.0% 20.0% Time Phased - Risk Adjusted Estimate 1.0% Technical $100 10.0% 0.5%Parameters $90 0.0% $75 $215 $356 $497 $638 $778 $919 $1,060 $1,201 $1,341 0.0% Allocated Dollars for 70% CL $80 Probability Histogram Confidence Level (CDF) CERs Point Estimate $70 Cost Uncertainty Analysis $60 TY $M $50 $40 $30 $20 Project Finish Date $10 100.0% 2.0% $0 90.0% 1.8% 80.0% 2006 2007 2008 2009 2010 1.6% 2011 2012 2013 2014 2015 2016 70.0% 1.4% Probability (Histogram) Confidence Level (CDF) 60.0% 1.2% 50.0% 1.0% 40.0% 0.8% 30.0% 0.6% 20.0% 0.4% 10.0% 0.2% 0.0% 0.0% 24 Mar 2012 24 Dec 2012 24 Sep 2013 24 Jun 2014 24 Mar 2015 24 Dec 2015 Probability Histogram Confidence Level (CDF) Schedule Schedule Uncertainty Analysis PRT#115 22 February 2012 Approved for Public Release
  17. 17. However, Budget Profiles Rarely Match Risk-Adjusted Time-Phased Estimates $100 $90 Allocated Dollars for 70% CL $80 Shortfall Point Estimate $70 Project Budget $60 TY $M $50 $40 $30 $20 $10 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Annual budget sufficient to cover estimated point estimate effort Shortfall in funding 70% effort for years 2007-2011 How Does Shortfall Impact Project?PRT#115 22 February 2012 Approved for Public Release
  18. 18. The Concept Tecolote Developed a ROM-level analysis technique for NASA to gauge the impact of budget availability on a project’s target cost confidence level The Technique requires:  Risk adjusted, time-phased cost estimate  Annual budget information  User input on how to address multiple items (e.g., penalties, etc) The General Approach  Compare estimated effort (i.e., point estimate, risk adjusted time phased results, or annual risk iteration results) to available budget  Identify and track budget shortfalls  Rollover unfunded effort, with associated inflation and productivity penalties, to future years  Apply logic to use available budget to fund rollover effortPRT#115 22 February 2012 Approved for Public Release
  19. 19. General Approach for Three Different ScenariosPRT#115 22 February 2012 Approved for Public Release
  20. 20. User Inputs and Controls The user has the ability to:  Select type of analysis to conduct  Point estimate  Risk-adjusted (e.g., 70%) cost estimate  Dynamic assessment of confidence level results  Specify budget scenarios  Advanced Considerations  Extend budget at peak  Incorporating fixed costs (LOE) into  Infuse/Reduce funds in specific consideration year  Conducting portfolio analysis  Allow budget carryover  Incorporate penalties for rollover  Outputs effort:  Initial phasing result for Target CL  Inflation considerations  Constrained phasing result  Productivity loss  Additional years of funding requiredPRT#115 22 February 2012 Approved for Public Release
  21. 21. Example Case – 70% Effort Exceeds Available Budget Phased budget and point estimateTY$M FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 TotalBudget $25 $55 $65 $80 $70 $60 $30 $15 $400Cost $21.8 $51.9 $63.6 $62.4 $52.9 $37.8 $18.9 $1.8 $311 Cost Estimate Uncertainty Analysis Results TY $M 100.0% 4.5% Cost risk analysis data (TY$M) 90.0% 80.0% 4.0% 3.5% Probability (Histogram) Point Confidence Standard 70.0% Confidence Level (CDF) 3.0% Mean CV 60.0% Estimate Level Deviation 50.0% 2.5% 2.0% 40.0% $311 42% $372 $168 0.45 30.0% 1.5% 20.0% 1.0% 10.0% 0.5% 0.0% 0.0% $75 $216 $357 $499 $640 $781 $922 $1,063 $1,205 $1,346 Probability Histogram Confidence Level (CDF) Cost estimate @ 70% confidence levelTY$M FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Total70% CLE $29.8 $71.2 $87.1 $85.6 $72.4 $51.7 $25.9 $2.5 $426 Budget Shortfall to Fund 70% CLE PRT#115 22 February 2012 Approved for Public Release
  22. 22. Understanding the Shortfall – Work Slips to the Right  Budget exceeds Budget vs 70% Risk-Adjusted Estimate - Surplus/Shortfall Budget vs Pt Estimate - Surplus/Shortfall  Total Budget phased point $25 estimate in every year inadequate to $26M Total Shortfall - $89M Budget Surplus  Limited70% CLE fund surplus in $20 early years Funds Available For Reserve Utilization   Largeglance seems At first shortfall $15 in early years, if that enough reservesAnnual Surplus / Shortfall - TY$M are available for $10 funds program cannot be obtained, $5 $5 effort will slip into future $0 $0 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 periods -$5 -$5  2007 work slips to 2008 -$10  and so on… $50M of work effort  Extended work -$15 cannot be done in carries 2007-2011 penalties -$20  Inflation -$25  Productivity What are Possible Budget Scenarios? PRT#115 22 February 2012 Approved for Public Release
  23. 23. Identifying Budget Scenarios Budget Scenario Considerations  Need to be realistic  Near-term funds are difficult to obtain  Annual increase must match capability to ramp up staffing levels and should track to required work  Should not have extreme changes year-to-year  Difficult to increase beyond peak spending year  Cannot upset overall portfolio needs Potential Options  Identify infusion of funds into specific years  Extend funding beyond peak funding year at or near peak value $100.000 $90.000 $80.000 $70.000 Project Budget $60.000 $50.000 $40.000 Budget Extension at Peak $30.000 $20.000 $10.000 $0.000 2007 2008 2009 2010 2011 2012 2013 2014 2015PRT#115 22 February 2012 Approved for Public Release
  24. 24. Example Case Results – Effort Rollover Fits Under Budget Constraint $100 70% Risk Adjusted Estimate RolloverEffort 70% Risk Adjusted Estimate $90 14 2 3 Budget Funded Effort BudgetEstimateEffort Point Funded Effort Budget Funded $80 70% Risk Adjusted Estimate Project Budget Extended Budget $70 Extended Budget $60 $50 $40 $30 $20 $10 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 20161. Initial Conditions indicate budget inadequate to fund 70% CLE2. Project funded to budget value3. Budget scenario created to extend budget at peak value and 70% time-phased estimate funded to extended budget values4. Impact of rollover effort funded in out-yearsPRT#115 22 February 2012 Approved for Public Release
  25. 25. Modeling the Effect of Budget Constraints on Cost and Schedule INTEGRATED COST AND SCHEDULE RISK ANALYSISPRT#115 22 February 2012 Approved for Public Release 25
  26. 26. Integrated Cost/Schedule Budget Constrained Reserve Phasing Model A tool is needed that accurately models the relationships between the work to be done, the annual budget available, and the overall cost and finish date of a project Tool can be used to determine appropriate annual budgets and reserve strategies to meet the Joint Confidence Level requirement The tool is called Budget-Constrained Reserve Phase (BCRPhase) 26 PRT#115 22 February 2012 Approved for Public Release
  27. 27. High - Level Model Concept Schedule Activities from JCL Models (or Project Schedules) are Mapped into Budget Organizations (Groupings) Links Between Budget Organizations are Identified Costs from JCL Models (or Projects Costs/Budget) are Mapped into Behavior Buckets within Budget Organizations Cost Distributions Obtained from JCL Models (or other Analytical Methods) are Defined for Each Element Discrete Risks from JCL Models (or Project Risk Lists) are Specified Annual Values are Identified for Each Budget Organization Monte Carlo Simulations are Generated to Determine Effort, Work is Adjusted to Fit Effort within Budget LevelPRT#115 22 February 2012 Approved for Public Release 27
  28. 28. Modeling Approach – Enabling via Budget Organization LevelsPRT#115 22 February 2012 Approved for Public Release 28
  29. 29. Example Simple Project Model (5 Budget Organization Items) BudgetEffort/Costs Schedule PRT#115 22 February 2012 Approved for Public Release 29
  30. 30. Model in Action – What Happens When Effort Exceeds Budget Availability Organization 1 Organization 2 Time Time-Driving Costs (Touch Labor, Materials, etc.) Schedule Activity Time-Driving Costs Driven By Schedule Slip Milestone Level Of Effort Costs Schedule DependencyPRT#115 22 February 2012 Approved for Public Release 30
  31. 31. Modeling the Effect of Budget Constraints on Cost and Schedule SUMMARYPRT#115 22 February 2012 Approved for Public Release 31
  32. 32. Summary Understanding connection between cost and schedule is of utmost importance for estimators Available funds and resources are major items that directly impact overall project schedule and end costs Tools have been developed and research is continuing to help us assess this intricate system Budget Duration Technical Reqts Work Plan Scope Cost Effort Size PRT#115 22 February 2012 Approved for Public Release 32
  33. 33. Thank YouPRT#115 22 February 2012 Approved for Public Release 33
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