Process-Based Cost Modeling

Abstract

Weight-based parametric estimating has been used for predicting cost since the 1950s. The state of the art has advanced significantly during the last 50 years. Most of these advances – such as estimating by analogy, multiple independent variables, and nonlinear techniques – have focused on improving cost estimating relationships that are based on regression analysis. While highly useful, regression-based estimates have limitations. Thus new tools may be useful in supplementing existing approaches. Process-based cost modeling is a technique that has the potential to improve the fidelity of traditional parametric estimates. Process-based modeling estimates cost by relating cost drivers directly to the processes involved in designing, developing, testing, and producing a program. A research project to develop a process-based model to estimate acquisition costs for launch vehicles for Marshall Space Flight Center’s Engineering Cost Office was in development for 18 months. The methodology, data collection, analysis, and algorithm development are described in detail. Introduction Process-based modeling is a relatively new approach to modeling cost. Traditional parametric analysis has focused on the “what” of cost – the weight and other technical parameters. Process-based modeling focuses on the “how” of cost by relating cost drivers to the individual processes involved in the design, development, test, and production of a program. A research project to develop a process-based acquisition cost model for the Engineering Cost Office (ECO) of Marshall Space Flight Center (MSFC) was recently conducted. The objective was to improve state-of-the-art cost modeling techniques by using process-based estimation. Process-based models supplement traditional parametric tools, and are not intended to replace parametric estimates. Traditional regression analysis provides an early estimate of a project’s cost. These traditional weight-based statistical estimates can be significantly refined using a process-based model. The beta version of the process-based model consists of an integrated, Excelbased interface that includes all the work breakdown structure (WBS) elements relevant to building a new manned launch vehicle. This integrated model has been calibrated to Space Shuttle Orbiter (SSO), Apollo Command Service