NASA CostRisk Tenet 8

1
NASA Cost-Risk Tenet 8

• NASA cost-risk assessments account for all known
  variance sources and include provisions for
  unknown-unknown risks

2
Tenet 8 Variance Sources

• Primary objective Realism
• Derived objective Analyses are comprehensive
  with regard to sources of variance
• Classes/categories of risk variance sources
• Estimating uncertainty
• Technical risk known and unknown
• Unknown risks not quantifiable
• Process Systematic review of estimate to
  identify random/uncertain/unknown elements

3
Estimating Uncertainty

• CERs
• Include standard error/percent error, and
• Uncertainties in model coefficients/parameters
• Total estimating uncertainty conditional on
  values of CER independent variables
• Grass roots estimates (no. units x cost/unit)
• Estimating uncertainty cost/unit
• Heuristic/commercial models
• Establish estimating uncertainty from
  calibrations

4
Technical Risk Variance

• The skys the limit!
• Comprehensive, unbiased risk assessment is the
  key
• For CERs, its the distributions of the
  independent variables and
• Correlation between the IVs
• Intra-correlation between multiple IVs for a
  given WBS element
• Inter-correlation between IVs for different WBS
  elements

5
Technical Risk Variance Cont

• For grass roots estimates, its the uncertainty
  in number of units, size or mass of product
• For commercial models, its the uncertainty in
  the input parameters
• Note By the time we get to the cost estimate for
  a given WBS element,
• Estimating and technical risk are blurred
• Assessments of risk for the element may reflect
  only technical risk, because
• Risk assessors typically have little
  understanding of estimating uncertainties

6
Correlation

• Requires assessment of both cost estimating and
  technical interdependencies
• Global factors cause at least some correlation
• The estimating process may induce correlation
  when the same individuals are involved in
  multiple assessments/estimates
• As the number of WBS estimates increases, the
  contribution of correlation to total cost
  variance becomes a larger fraction of the total
  cost variance

7
Unknown-Unknowns

• Risks not quantifiable in probabilistic terms, or
  possibly not even describable
• Recommended approach Include a risk reserve for
  U-Us
• Base amount on analysis of contract changes
• For each change, establish whether it would have
  been embedded in risk variance
• Calculate percent of cost not represented in risk
  analysis
• Not intended for major changes/accidents