CLB024 Intro duction to Cost Risk Analysis Lesso2 - El em ...cbafaculty.org/CLB024_Cost Risk...

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CLB024 Intr o duct ion to Cost Risk Analysi s Lesson 2 - Elements of Risk TOC 1RESOURCES I PR I NT I HELP Lesson Obj ect ives Thi s lesson provides an ov erview of ri sk elements . Below are the obj ec tiv es c ov ered in thi s lesson : • Define Performance Related Risks and it's separate categories • Define Schedule Related Risks • Define Cost Estimat ing Risks I Poge 1 of 1S I ..... Back Next

Transcript of CLB024 Intro duction to Cost Risk Analysis Lesso2 - El em ...cbafaculty.org/CLB024_Cost Risk...

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC 1RESOURCES I PR INT I HELP

Lesson Obj ectives

This lesson provides an overview o f risk elements. Below are the objectives covered in this lesson:

• De fine Performance Related Risks and i t 's separate categories

• Define Schedule Related Risks

• De fine Cos t Estimating Risks

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CLB024 Introduction to Cost Risk Analysis Lesson 2- Elements of Risk TOC I RESOURCES 1 PRINT 1 HELP

Elements

Elemen ts o f Risk require iden ti fication before they can be assessed or managed. Previous experience with similar programs, analogy comparisons and exper t in terviews are examples o f iden ti fying methods. Cost analysts are able to quan ti fy the risks in dollar terms by taking iden ti fied risk elemen ts in to account in the cost estimate.

The elemen ts are:

Perfor m ance Related Risks Schedu le Related Risks Cost Est i mati ng Risks

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PR INT 1 HELP

Performance Related Risks

The first risk element is Performance Risk . Performance related risks refer to requirements and performance uncertainties found in acquisition programs. These risks come from the uncertainties associated from all requirements ( from the user to congress) such as program and technical issues.

Examples of four sub-elements o f Performance Related Risks are :

SLipportabili ty Risk• Technical Risk ~ Configuration Uncertainty Programmatic Risk

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PR INT 1 HELP

Technical Risk

Technica l Ri sk (or technical uncer tainty) addresses the following questions:

• How capable is the technology?

• Can the system be adapted to meet changing performance expec tations?

• Will the maturity of existing technology mee t curren t design and performance requirements?

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PR INT 1 HELP

Configuration Uncerte~inty

Configuration Uncertainty is the risk associated with changes in physical or performance characteristics during the life cycle of the sy stem.

There are four outstanding reasons that configuration may change:

The original design does not meet performance requirements

Change in hardware specification change the system's per formance charac teristics

Error or omission of the initial system specifica tions

Strategy changes that affect employment and deployment of the sy st em

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRI NT 1 HELP

Supportability Risk

Supportability refers to the ability to support a system in the field or during maintenance routines . There are 10 Integrated Logistic Support ( ILS} elements that could be risk sources:

Maintenance Facilit iesQ QPlanning

Technical Data Support EquipmentQ Q Computer Training Suppor tQ QResources

Manpower and Packaging, Handling, St oring, Q QPersonnel and Transportaion

Training Design InterfaceQ Q

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRINT 1 HELP

Programmatic Risk

Programmatic Risk refers to risk that has an impact across the program and can be outside of program control.

Example sources for program risk are :

~ Authorita tive decisions

~ Indirec t even ts or actions

~ Unknown produc tion problems

..LL&.. Other unforeseen problems w ith the system's - capabilities

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRI NT 1 HELP

Schedule Related Risk

The second element of risk is Schedule .

This refers to anything that changes the program schedule and affects the length of the program, from initiation to end.

The following are examples o f how or when the schedule may be affec ted :

• Change in sys tem requirements

• Change in design requirements

• Change in strategy

• Change in funding sources

• Change in personnel performing the work

Click here for an example of an acquisition schedule.

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Popup Text

Acquisition Schedule

Acronym Legend:

AoA - Amphibious Objective Area BPAUV - Battlespace Prep Autonomous Undersea Vehicle CDD - Course Design Document CDR - Critical Design Review FRP - Function Review Process IOC - Initial Operational Capability PDR - Preliminary Design Review SMCM UUV - Surface Mine Countermeasure Unmanned Undersea Vehicle TECH/OPEVAL - Technical Operation Evaluation UUV - Unmanned Undersea Vehicle

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRINT 1 HELP

Cost Estimating Risk

The third risk element is Cost Estimating Risk . This deals w ith the fact that there may be uncertainty associated with the cost estimating method used by the analyst and that these methods, data and tools may not be totally accura t e.

Example sources of this type risk are :

• Cost Analysjs

• Cost Es t jma t jng Bela tionships CCERs l

• Data Error

• Extrapolation Errors

• Price Level Changes

• Aggregation

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Popup Text

Cost Analysis

Cost analysts use a variety of techniques and thus may produce different cost estimates for the same item.

Cost Estimating Relationships (CERs)

CERs recognize variability in the data through the error term and the standard error.

Data Error

Data error is the use of incorrect archived CER data (Cost Estimate Relationship).

Extrapolation Errors

Cost Estimating Relationships that held in the past may not hold in the future; and analysts may use them to predict outside the relevant range of the equation.

Price Level Changes

Future prices are estimated using assumed inflation rates. These rates are only estimated, with changes in the artes driving prices higher or lower.

Aggregation

Aggregation is the combination of separate estimates into one estimate.

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CLB024 Introduction to Cost Risk Analysis Lesson 2- Elements of Risk TOC I RESOURCES 1 PRINT 1 HELP

Knowledge Review

Selec t the correc t matching pairs o f risk types and risk charac teristics.

0 Risk Charac teristic : Technical Data, Risk T ype: Programmatic Risk Risk Charac teristic : System Adaptabili ty, Risk T ype: Configuration Uncertainty Risk Charac teristic : Unkown Produc tion Problems, Risk T ype: Supportabili ty Risk Risk Charac teristic : Strategy Changes, Risk T ype: Technical Risk

Risk Charac teristic : Technical Data, Risk T ype: Supportabili ty Risk Risk Charac teristic : System Adaptabili ty, Risk T ype: Technical Risk Risk Charac teristic : Unknown Produc tion Problems, Risk T ype: Programmatic Risk Risk Charac teristic : Strategy Changes, Risk T ype: Configuration Uncertainty

Check Answer

The correc t matching pairs o f risk types and risk charac teristics are: Risk Characterist ic: Technical Data, Risk Type: Support ability Risk Risk Characterist ic: Syst em Adapt a bility, Risk Type: Technical Risk Risk Characterist ic: Unknown Prod uct ion Problems, Risk Type: Programmatic Risk Risk Characterist ic: St rategy Changes, Risk Type: Configuration Uncertainty

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRINT 1 HELP

Knowledge Review

A c hange in hardware specifications is a characteristic of

Technical Risk

5L1pportabili ty Risk

~ Configura tion Uncer tainty

Programmatic Risk

Check Answer

A change in hardware speci fica tions is a charac teristic o f config urat io n uncertaint y .

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRI NT 1 HELP

Summary

Elements of Ri sk:

• Performance Related Risks

• Schedule Related Risks

• Cost Estimating Risks

Examples o f Pe rfo rmance Re lated Risks sub- e lem ent s are:

• Technical Risk

• Con figuration Uncertain ty

• Supportabili ty Risk

• Programmatic Risk

How capable is t he te chnology?

• Can the system be adapted to meet changing performance expectations?

• Will the maturity of existing technology meet current design and performance requirements?

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PR INT 1 HELP

Summary, Cont.

Configuration Uncertainty

There are four outstanding reasons that configuration may change:

• The original design does not mee t performance requirements

• A change in the system's desired performance changes the hardware specifications

• Error or omission o f system specifications

• Strategy changes that affec t employment and deployment of the system

Support abilit y Risk

There are 10 Integrated Logistic Support (ILS) elements that should be evaluated for potential risk.

• Maintenance Planning • Manpower and Personnel

• Support Equipment • Technical Data • Training • Training Support • Computer Resources • Facili t ies • Packaging, Handling, Storing, and Transpor tation

• Design Inter face

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PRI NT 1 HELP

Summary, Cont.

Programmatic Risk refers to risk that makes an impact across the program and can be outside of program control. It includes:

• Authoritative decisions

• Indirect events or ac tions

• Unknown production problems

• Other foreseen problems with the system's capabili t ies

Sched uled Rela t ed Risk re fers to what affects the length o f a program's development, from it 's acquisition to i ts end use. I t includes:

• Change in system requiremen ts

• Change in design requirements

• Change in strategy

• Change in funding sources

Cost Est im ating Ri sk 's additional sources are:

• Cost Analysts

• Cost Estimating Rei a tionship

• Data Error

• Extrapolation Errors

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CLB024 Introduction to Cost Risk Analysis

Lesson 2 - Elements of Risk TOC I RESOURCES 1 PR INT 1 HELP

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