Research Sponsors Robert Flowe, Gary Bliss OSD Program Analysis and Evaluation, Resource Analysis

1. Capabilities Based Cost Analysis Adapting to a New Paradigm Overview of an OSD-Sponsored Research Project* Principal Researchers Dr. Maureen Brown, Mr. Sean Hamel University of North Carolina School of Government Dr. David Zubrow, Mr. Bill Anderson, Mr. Jim McCurley Software Engineering Institute Mr. Robert Jones, Ms. Elizabeth Koza, Mr. John Wilke, Mr. Paul Hardin Technomics, Inc. Dr. David Usechak OSEC Research Sponsors Robert Flowe, Gary Bliss OSD Program Analysis and Evaluation, Resource Analysis Supporting Co-Sponsors Office of the Under Secretary of Defense (Acquisition Technology & Logistics) Air Force Cost Analysis Agency Office of the Deputy Assistant Secretary of the Army for Cost and Economics *The views expressed in this presentation are those of the author, and should not be construed as representing the views of the Department of Defense, or its components

2. AGENDA • Background • Capabilities & Portfolio Management (C/PM) Issues • Interdependence and Outcomes Hypothesis • Risk Indicators – Software Engineering Institute • Interdependence and Acquisition Risk • Interdependence – University of North Carolina • Programmatic Interdependence and Cost/Schedule Breaches • Architectural Parametric Modeling – Technomics • Constructive Interdependence and Development Resource Demands • Next Steps

3. programmatic constructive operational Three “Domains” of Interdependence Programmatic - Acquisition and management practices Constructive – Technical construction activities Operational – Mission, goals, objectives, and their fulfillment

4. Total Effort Drives How Does ‘Interdependence’ Matter?Concept Map of Attributes and Outcomes Relate to “Inherent Costs” Constructive Interdependence Inherent Effort Cost Schedule Performance (Outcomes) Relate to “Induced Costs” Programmatic Interdependence Induced Effort

5. C/PM vs “Big”– Management Issues • Capability and portfolio management (C/PM) drives cooperative management of entities which are developed and managed separately • This creates induced costs due to (for example) • decentralized management and independent authority of constituent systems • asymmetrical incentives for SoS vs constituent objects/systems goals and objectives • different maturities of the objects/systems C/PM incurs effects beyond scale alone

6. What’s Wrong With Current Methods? • Department management and oversight processes still largely program-centric • Interdependence effects not routinely captured • Transaction costs largely exogenous to program baselines • Failure to understand effects of interdependence • Results in unanticipated, uncontrolled program cost & schedule growth • Results in diminished capacity to develop joint capabilities

7. Diagnostic Risk Indicators • Inter-program interdependence influences each program’s outcomes • suggests potential risk areas for program execution • A risk taxonomy • applicable to prospective SoS or joint capability implementations • Early insight • allow proactive mitigation

8. Systems-of-Systems Risk Taxonomy

9. In Systems-of-Systems, the requirement for interoperability expands the Risk Taxonomy

10. Interoperability Expands the Risk Taxonomy

11. Observations of Joint Capabilities & Interdependence • No program is an “Island” • Programs share and transfer resources across programmatic boundaries • These “resources” include: • Capital • Materiel • Labor • Authority • Data

12. Observation: Interdependence Correlates to Schedule Slippage

13. Parametric Model: Study of Architectural Based Cost Estimation Hypothesis: a relationship exists between resources required and architecture-based interdependencies

14. Preliminary Results A Parametric Estimating Relationship provides preliminary evidence that there is a relationship between resources required and architecture-based interdependencies * The RDT&E Budget, i.e., the sum of actual and estimated costs to completion, is used as a proxy for RDT&E Cost * Equation (1)

15. Parametric Model: Study of Architectural Based Cost Estimation Results: Preliminary analysis using Equation (1) supports the hypothesis that a relationship exists between resources required and architecture-based interdependencies Next Step: Apply analysis approach to programs using costs instead of budgets

16. Next Steps • Technical Research • Pilot Study • Model detailed relationships • Develop representation of overall program properties • Validate data gathering & analysis methods • Risk Indicators • Continuing analysis for confirmation of risk indicators • Interdependence Cost and Schedule Consequences • Expand data points and refine Cost Estimating Relationships • Explore portfolio analysis for targets of interest • Collaborations • Continue collaborative work with Services & AT&L • Seek collaboration with ASD/NII on DoDAF • Develop collaborations with T&E community for test data