Title: Cost Estimates in the U.S. Intelligence Community Consequences of the FY 2004 Intelligence Authoriza
1- Cost Estimates in the U.S. Intelligence Community
Consequences of the FY 2004 Intelligence
Authorization Act - Keith Cooperman Laura Guffey
- Northrop Grumman I.T. / TASC
- 15036 Conference Center Drive
- Chantilly, VA 20151
- Keith.Cooperman_at_ngc.com
- Laura.Guffey_at_ngc.com
- 2004 Annual SCEA Conference
- June 16, 2004
- Los Angeles, CA
2The Heart of The Matter
- Intelligence Authorization Act for Fiscal Year
(FY) 2004 states - ...the magnitude of growth in the costs of
acquisition of many major systems indicates a
systemic bias within the intelligence community
to underestimate the costs of such acquisition,
particularly in the preliminary stages of
development and production. - Independent cost estimates prepared by
independent offices, have historically
represented a more accurate projection of the
costs of acquisition of major systems. - The Director of Central Intelligence shall, in
consultation with the head of each element of the
intelligence community concerned, prepare an
independent cost estimate of the full life-cycle
cost ... of each major system to be acquired by
the intelligence community.
Source Intelligence Authorization Act for FY
2004, Section 312, (a)(2), (a)(3), (b)(1)
3Disclaimers
- U.S. Intelligence Community (IC) has been
receiving greater scrutiny on the costs,
benefits, risks, and schedules of its programs - IC members budget figures (historical, present
and future) are classified - National security is a valid reason for secrecy,
however, that has somewhat shielded the IC from
the same degree of public and media scrutiny as
DoD and other government agencies - The content of this presentation is based on
- FY 2004 Intelligence Authorization Act, Section
312 - National Security Act of 1947 (as amended)
- Direct interviews with Congressional Staff and
members of the IC with a role in cost estimating,
analysis and budgeting (non-attribution),
conducted at the unclassified level - Defense Acquisition University (DAU), DoD
Business Transformation briefing - DIA DIRMO, GDIP 101 briefing, 14Mar03
- Personal cost estimating and analysis experience
in the IC and DoD - The analysis and recommendations contained herein
are solely the opinions of the authors and does
not necessarily represent the position of
Northrop Grumman I.T. / TASC or its affiliates
4Why?
- High Profile Programs with Dramatic Cost Overruns
- Future Imagery Architecture (FIA)
- Next Generation Imagery Satellites operated by
the National Reconnaissance Office (NRO) - Media Attention (Newsweek Cover Story on FIA)
- Program still pre-IOC
- Cost issues part of larger technical problems
- Congressional Frustration
- On the Horizon
- Other programs across the Intelligence Community
that have high levels of Congressional interest,
as well as big price tags - End of the 9/11 Goldrush?
- Recent reliance on supplemental funding for new
initiatives in support of Afghanistan, Iraq - New requirements OM tails bigger shortfalls
5Introduction to Cost in the IC (National Agencies)
6What the Org Chart doesnt say
- Role of organizations responsible for cost
estimating and analysis differs among the major
IC agencies - Some sit within the acquisition chain or main
acquisition organization - Others are responsible to an agency
comptroller/financial manager - Some have multiple cost groups (agency level,
office level, program level) - Others have no single focal point for cost
estimating and analysis - Cost groups are a mix of government and
contractor staff - Cost groups do not necessarily control the
budgeting process - Cost estimates are often AN input, not THE input,
to building budgets - Similar situation elsewhere in DoD and the
Federal Government
7Where the Money Comes from
- Intelligence Agencies receive funds from both IC
and DoD sources - National Intelligence
- National Foreign Intelligence Program (NFIP)
- Support multiple government agencies across
executive branch - OMB sets top-line, DCI gives guidance, IC CAIG
has cost oversight - Defense-Wide Intelligence
- Joint Military Intelligence Program (JMIP)
- Support multiple defense organizations
- OMB sets top-line, SECDEF gives guidance, DoD
CAIG has cost oversight - Tactical Intelligence
- Tactical Intelligence Related Activities
(TIARA) - Service specific functions
- OMB sets top-line, SECDEF gives guidance, DoD
CAIG has cost oversight - Traditionally, DoD has had a more robust
cost-oversight capability (DoD CAIG), born of
similar legislation (Title X, Section 2434)
8Implementation
- Compliance
- Future programs - RDTE and procurement over
500M - Existing programs - Future RDTE and procurement
over 500M - Thresholds do not include OM
- Joint DoD/IC systems are included
- Budgets must reflect funding requirements
identified in the ICE - ICE must quantify risk
- ICE requirement in FY 2005
- IC CAIG seeking to increase staff
- IC CAIG will perform Independent Cost Assessments
(ICAs) rather than ICEs on programs complying
with Title X, Section 2434 - Agencies define a program
- ICEs must be reported to Congress before contract
activity - ICE requirements in FY 2006 and beyond
- ICEs must be reported in Congressional Budget
Justification Briefing (CBJB) - IC CAIG will perform ICEs on programs it deems
necessary - IC CAIG may submit ICEs to Congress even when
500M threshold is not met if it feels necessary
9What the Law doesnt say
- What group under the DCI will be primarily
responsible? - CMS has decided that the IC CAIG will take the
lead - Who will actually perform and create the ICEs?
- IC CAIG Staff
- Agency cost groups
- Government staff / contractors
- What defines independent?
- Relationship to acquisition chain
- Soft pressure
- What happens if the Executive Branch doesnt
submit a budget that is supported by an ICE? - A Constitutional question
- President has the authority to submit budgets,
but Congress has power of the purse
10What does Congress really want?
- No more big surprises
- Cant afford (politically or financially) large
programs with unexpected, major overruns - Impact is felt across the IC
- Cost growth may be inevitable (but arguably
predictable), along with technical challenges,
but desire is to avoid having programs that have
issues of such a magnitude - Budgets that reflect the true total cost of
ownership of major systems - Ability to conduct effective, long-range
intelligence programming - One aspect of better general management of the IC
- An end to annual hat-in-hand exercise where
agencies come to the Hill seeking supplementals /
overguidance - Agencies will always have more requirements than
resources, but better budgeting and planning are
prerequisites to close the gap - Little desire for direct confrontation with
Executive Branch - But Congress may have to use the
power-of-the-purse if push comes to shove
11Who should create the ICEs?
Bottom-Line Neither IC CAIG nor Agency Groups
can do it alone. Only practical option over the
next few years is for IC CAIG to act in an
oversight role over agency estimates for programs
that meet statutory requirements. IC CAIG should
perform its own estimates on selected
high-profile or high-risk programs.
12Try but Fail ICE Pitfall
- Problem
- ICEs often have schedule slips and risk built
into them - ICE estimate curves are often longer and taller
than contractors - Meeting schedule
- ICE costs ramp up at later date because schedule
delays are built into the model - Programs need funds earlier if they want to try
and meet the schedule
13DoD Acquisition Process Flow
Source DoD Business Transformation Briefing,
DAU, dod5000.dau.mil
14ICE Process Flow
Agency
IC CAIG
K E Y
DoD CAIG
Joint IC / DoD CAIG
Congress
15The Law of Unintended Consequences
- Cost Estimators / Analysts
- Demand gt Supply
- Clearance Bottleneck
- Higher salaries, more job-changers, rush to
find ways to get timely TS/SCI clearances - Greater reliance on Contractors
- More flexible workforce
- Some work can be done at unclassified level
- Must ensure that analysis isnt compromised by
desire to keep the client happy - DoD CAIG, however, has been reluctant to have
contractors perform ICEs on DoD programs
16Recommendations Agency Level
- Primary agency cost groups must not be part of
the acquisition chain - Independence of cost estimates will be in
question - If sufficient safeguards are in place to ensure
independence (e.g., reporting to the Milestone
Decision Authority), having cost groups within an
agencys acquisition organization should be
acceptable - Establishment of an Agency level cost group, if
none already exists - Agency cost group directors should be at GS-15 or
SES level - ICEs must be formally integrated into the budget
creation process
17Recommendations IC Level
- Establishment of IC cost estimating standards,
preferably led by IC CAIG - Work Breakdown Structures (WBS), Basis of
Estimates (BOE), acceptable methodologies, etc,
that should leverage industry best practices and
DoD CAIG standards - Process to resolve differences in methodology for
incorporating schedule risk to prevent lack of
sufficient up-front funding - IC technical and reporting requirements are
sufficiently distinct from DoD that a common IC
cost framework is required, particularly in light
of new statute - IC CAIG should leverage agency capabilities as a
force multiplier, acting as an independent
steward of the process - Independent Cost Assessments (ICA) of agency
ICEs is the only realistic way of meeting both
the letter and spirit of the Law - Creation of a DCI Directive (DCID) on process for
creation of ICEs and standard procedure for
incorporation into Agency budgeting process
18Recommendations Federal Level
- Congress should hold firm on demand that IC
budgets reflect ICEs - Goal is to adhere to spirit of fully funding
programs and accurate reporting to Congress - Agencies and DDCI/CM should detail consequences
when Congress or President leverage requirements
without additional funding - Full life-cycle implications of new requirements
need to be clear - Temporary surge support (Afghanistan, Iraq)
always seems to leave behind a long OM tail
19Recommendations Contractor Community
- Need to hire more cost analysts/estimators is
clear, however - Time needed to train junior analysts
- Time money needed to get clearances
- Time needed to get analysts familiar with IC
programs and processes - Blur the lines between cost and budget world
- Cost estimates dont run programs, budgets do
- Cost estimators arent political by nature, but
need to do a better job ensuring that budgets are
based on solid analysis - Contractors can be independent advocates, or
program boosters - Formal Non-Disclosure Agreements (NDA) and
Organizational Conflict of Interest (OCI)
programs are important - Informal Senior contractor management needs to
stand behind their analysts work to ensure
integrity - Contractors work best when they tell their
customers what they need to hear, rather than
what they want to hear
20 21Authors
- Keith W. Cooperman
- 703-961-3431, Keith.Cooperman_at_ngc.com
- Senior Cost Analyst for Northrop Grumman I.T. /
TASC in Chantilly, VA. Currently part of the
National Geospatial Intelligence Agencys (NGA)
Enterprise Engineering (EE) Cost Estimating
Budget Analysis (CEBA) team. Prior to joining
TASC, developed cost estimates and business case
analyses for IC and DoD clients with Booz Allen
Hamilton in McLean, VA. SCEA Certified Cost
Estimator / Analyst - Joined the CIAs National Photographic
Interpretation Center (NPIC) in 1996, serving for
four years as an imagery intelligence analyst
specializing in economic and industrial analysis,
including a tour as the NIMA Liaison to the U.S.
Department of Commerce. In 1995, interned at the
White House for the National Economic Council - M.A. (1996) and B.A. (1995) in International
Relations from The Johns Hopkins University in
Washington, DC, Bologna, Italy, and Baltimore,
MD, with concentrations in International
Economics, European Studies and American Foreign
Policy - Laura Guffey
- 703-961-3440, Laura.Guffey_at_ngc.com
- Intermediate Cost Analyst for Northrop Grumman
I.T. / TASC in Chantilly, VA. Currently working
with NGA and the National Reconnaissance Office
(NRO) to develop cost estimates and business case
analyses. Prior to joining TASC, performed data
collection analysis, independent cost estimates
(ICEs), and cost model development for the NRO
Cost Group (NCG) - B.S. (2002) in Biomedical Engineering and
Biological Engineering from North Carolina State
University