Historical rend Analysis (HTA) Analysed - SCAF Trend Analysis... · Three different approaches to...

Historical Trend Analysis (HTA) Analysed

SCAF April 2010

Dale ShermonSenior Executive Consultant

PRICE SystemsHook

[email protected]+44 (0)1256 760012

Copyright PRICE Systems 2010

mailto:[email protected]�

Objective

The objective of the study is to stimulate discussion amongst the cost community as to the usage of Historical Trend Analysis (HTA), a common term which is used, but has not matured in many ways


Agenda

Introduction

Three approaches to Historical Trend Analysis;1. Complexity versus time

2. Production Cost versus time

3. Multi-variable versus time

Analysis of accuracy

Case study

Summary


Background - SDR

1.29 On the basis of experience in the United Kingdom and internationally, if we continue to search for a technological edge, including improved protection for our personnel, we can expect the cost of successive generations of equipment to continue to rise at above the rate of inflation.

1.31 These are enduring trends, and other advanced militaries around the world face the same challenge. Historically, rising unit costs have been offset by increases in capability and changes in the nature of the threat which have led us to reduce numbers of both personnel and platforms. But there are limits to how far capability improvements or efficiency can compensate for numbers.

Source: Adaptability and Partnership: Issues for the Strategic Defence ReviewISBN 978-0-10-177942-5


Background – Acquisition Reform

1.7 Around 98% of our major projects deliver the operational performance needed at the front line. But they also tend to increase in cost – by an average of 2.8% each year. And they suffer delay, averaging 5.9 months (though some for reasons beyond MOD’s control).

2.4 Part of the problem of cost growth we have faced has come from not fully understanding at the outset what the costs and risks of a project might be.

Source: The Defence Strategy for Acquisition ReformISBN 978-0-10-177942-3


Reform Strategy

Source: The Defence Strategy for Acquisition ReformISBN 978-0-10-177942-3


Agenda

Introduction





Case study

Summary


1. Complexity versus Time

Source: “Cost Complexity Forecasting Historical Trends of Major Systems” 1990 Varese ITALY - D Webb


Complexity (MCPLX) is derived through a parametric cost model.Complexity ≈ Normalised Cost Density

= Technology and Productivity index

1. PRICE Systems KnowledgeManager


1. Not all complexity trends are upwards

Commercial aircraft

y = -0.0514x + 110.04R2 = 0.6493

y = 0.0025x + 2.8405R2 = 0.0009

y = -0.0184x + 44.393R2 = 0.0303

0

1

2

3

4

5

6

7

8

9

10

1980 1985 1990 1995 2000 2005 2010

Normalised Cost Density

In-S

ervi

ce D

ate

Narrowbody WidebodyWidebody high capacity Linear (Widebody)Linear (Narrowbody) Linear (Widebody high capacity)


1. Productivity metrics

y = -0.0329x + 74.538

y = -0.0141x + 36.701

6

6.5

7

7.5

8

8.5

9

9.5

1975 1980 1985 1990 1995 2000 2005 2010

AIRBUSBoeingLinear (AIRBUS)Linear (Boeing)


Strong competition leading to productivity can balance technology gains

Assuming: Constant Operating Environment (Industry)

Time

Cost Lower complexity Higher complexity

+

-Technology Maturity Dates

Time Now

1. Normalisation - Technology Maturity model- effect of technology selection

Mature technology usage results in lower cost

Immature technology usage results in higher cost


Assuming: Constant Operating Environment (Industry)

Time

Cost Lower complexity Higher complexity

+

-

Time Now

1. Normalisation - Technology Maturity model- demand for latest technology

• Cheaper but less capable technology• Not desirable for Defence


2. Production Cost over time

“Source book of Defence Equipment costs” by Philip G. PughISBN 978-0-9556258-0-0


2. Production Cost versus Time


“Source book of Defence Equipment costs” by Philip G. PughISBN 978-0-9556258-0-0

Log-linear axis and exponential curves plotted, but linear cost growth documented

Is the total System subjected to technology cost growth?


HMS StevenstoneIn Service Date 1943

7,000 tonnes of technology growth?

Type 45In Service Date 2009

Weight

T1 Cost US$2006

High

High

Low

Low

= Historical Normalised Data

3. Multi-variable analysis- Weight Cost Driver

Source: Systems Cost EngineeringISBN 978-0-566-08861-2


} Positive Residual

} Negative Residual

1940 1950 1960 1970 1980 1990 2000 2010

Residual US$

2006 ec

3. Multi-variable analysis- Technology Cost Driver



+

-

Weight

T1 Cost US$2006

4,000 kg

Cost of 1950 system

Cost of earlier system

Cost of 1970 system

3. Multi-variable analysis- Combined weight and technology drivers



3. Aircraft Carriers Multi-variable analysisTone versus Weight (Tonnes) y = 561.9985x1.3374

R2 = 0.7343

$0$200,000,000$400,000,000$600,000,000$800,000,000

$1,000,000,000$1,200,000,000$1,400,000,000$1,600,000,000$1,800,000,000$2,000,000,000

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Weight (Tonnes)

Rec

urrin

g T

one

US

$

Residual versus ISD y = 33,635.79x - 551,844,424.48R2 = 0.48

-$400,000,000

-$200,000,000

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

1900 1913 1927 1941 1954 1968 1982 1995

In Service Date

Res

idua

l US

$


Agenda

Introduction





Case study

Summary


Test Data – Fighter Aircraft

Meteor Mk1 Thunderjet F-84B Meteor Mk3 Meteor Mk4Sabre F-86A Sabre F-86DScorpion F-89D Cougar F-9F Delta Dagger F-102AThunderchief F-105BVoodoo F-101A Fury F-1Super Sabre F-100A Super Sabre F-100C Starfighter F-104A Super Sabre F-100DHunter F1 Hunter F4 HunterF6 Swift F1/ F2 Swift F5Javelin F(AW) Mk2 Swift F7Thunderchief F-105DVoodoo F-101C Delta DartF-106A/B Lightning F1Phantom F4-A JavelinF(AW) Mk9

Phantom F4-B Freedom Fighter F-5A Freedom Fighter F-5B Lightning F2Phantom F4-C LightningF3 Phantom F4-DPhantom F4-E Delta Dagger F-102A LightningF6 Phantom F4-FPhantom F4-J Tiger II F-5E Freedom Fighter F-5FFalcon F-16A/D TornadoF2 Eagle F-15A/D EagleF-15E Mirage 2000Mirage 2000-5 TornadoF3 Saab JAS-39C RafaleRafale EurofighterTyphoon Raptor F/A-22A


Accuracy measure

Normalise the cost and technical data– Currency, economics, quantity

– Metric (kg) versus Imperial (lbs)

Subject the data to the trend process

Predict the historical projects based upon the trend predictions

Compare the coefficient of determination (R2) for the prediction versus the historical data


1. Complexity over time


R² = 0.9757

-100,000.00

-

100,000.00

200,000.00

300,000.00

400,000.00

500,000.00

600,000.00

- 100,000.00 200,000.00 300,000.00 400,000.00

Pred

icte

d co

st

Historical cost

Accuracy

UPC in National Currency and Dec 2001 ec

Linear (UPC in National Currency and Dec 2001 ec)

2. Production Cost ($/Kg) versus Time


R² = 0.8824

-20,000,000.00

-

20,000,000.00

40,000,000.00

60,000,000.00

80,000,000.00

100,000,000.00

120,000,000.00

140,000,000.00

160,000,000.00

180,000,000.00

200,000,000.00

$0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000

Pred

ictio

n (U

S $)

Historical Costs (US $)

Accuracy

US$ 2006 UPC Linear (US$ 2006 UPC)

3. Multi-variable versus Time


R² = 0.2311

R² = 0.8758

R² = 0.9052

-$50,000,000.00

$0.00

$50,000,000.00

$100,000,000.00

$150,000,000.00

$200,000,000.00

$250,000,000.00

$0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000

True

Con

cept

s pre

dict

ion

(US

$)

Historical Costs (US $)

Accuracy

T1 based on weight growth curve Core + Techniology

Core + Techniology + Performance Linear (T1 based on weight growth curve)

Linear (Core + Techniology) Linear (Core + Techniology + Performance)

Agenda

Introduction





Case study

Summary


Case Study

Originally conducted in 2001 at the request of the UK MOD

Presented at International Society of Parametric Analysts (ISPA) conference 2003

Won best applications paper award

Study of the historical trend of fighter aircraft complexities

Prediction of the Lightning II F35 aircraft production cost


Updated F35 Assumptions

Empty weight = 13,300 Kg

Length = 15.67m

Height = 4.33m

Wingspan = 10.7m

Crew = 1

Total Installed Power (kw) = 11,472

Production Quantity = 3,181

In-Service Date = 2012


http://www.lockheedmartin.com/data/assets/aeronautics/mediacenter/mediakits/f35/F-35FastFacts01142010.pdfhttp://en.wikipedia.org/wiki/F-35_Lightning_II

http://www.lockheedmartin.com/data/assets/aeronautics/mediacenter/mediakits/f35/F-35FastFacts01142010.pdf�




http://en.wikipedia.org/wiki/F-35_Lightning_II�



1. Complexity versus time


y = 0.0593x - 109.62

0

1

2

3

4

5

6

7

8

9

10

1940 1950 1960 1970 1980 1990 2000 2010

Com

plex

ity

In-Service Date

Flighter Aircraft

Complexity = 0.0593 x 2012 – 109.62= 9.691

1. Complexity versus time


$132m at April 2010 ec

2. Production Cost versus Time


y = 151.6188x - 295,621.6034R² = 0.7987

-$2,000.00

$0.00

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

1940 1950 1960 1970 1980 1990 2000 2010

UPC

/Kg

In Service date (ISD)

UPC/Kg = 151.6188 x 2012 – 295,621.6034= $ 9,435/kg

UPC = 9,435 X 13,300Kg= $ 125m at 2006 ec or $ 144m at 2010 ec

3. Multi-variable versus time - TrueConcepts


$135m at April 2010 ec

Agenda

Introduction





Case study

Summary


Conclusion – HTA Accuracy


HTA Accuracy (R2) for Fighter

Aircraft

Complexity versus time 0.976

Production Cost versus time 0.882

Multi-variable versus time 0.905

Conclusion – Case Study Prediction


Case Study – F35 Cost in 2010 US$

Complexity versus time 132m

Production Cost versus time 144m

Multi-variable versus time 135m

GAO- March 2010


Conclusion – Average Cost Growth


Case Study – F35 Average annual increase

(%)

Complexity versus time 4.6%

Production Cost versus time 1.9%

Multi-variable versus time 2.1%

Summary

Three different approaches to Historical Trend Analysis (HTA) have been discussed and analysed

All three Historical Trend Analysis (HTA) have a high degree of accuracy

Utilising a Parametric model is the most complete approach to normalising raw cost data

More systems (Sea, Land) need to be analysed, rather than just aircraft

Case Study predicts the F35 UPC to be $132m to $144m

Cost Growth for fighter aircraft is shown to be between 1.9% to 4.6% above inflation


Historical Trend Analysis (HTA) Analysed

SCAF April 2010

Dale ShermonSenior Executive Consultant

PRICE SystemsHook

[email protected]+44 (0)1256 760012


mailto:[email protected]�

Historical rend Analysis (HTA) Analysed - SCAF Trend Analysis... · Three different approaches to...

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