1. Defending Australia and its National Interests Estimation versus Analysis A discussion of similarities and differences in approach

2. Estimation Vs Analysis Presenter: Chloe Kempster

3. What is Estimation - What is Analysis –Cost Estimation is the process of producing an approximation of costs of a product, program, or project, determined on the basis of available information. –Cost Analysis is the breaking down of costs to the component parts to determine their relationship in making up the whole within the context of the project environment

4. Capability Development Group

5. Cost Estimates in Defence are divided into three main categories based on maturity and cost quality. (1) Defence Capability Plan (DCP) Entry Quality (Planning estimate) (2) First Pass Quality (Budget estimate) (3) Second Pass Quality (Firm estimate)

6. Four Hallmarks of Good Quality Estimates (1) Currency. Data must be relevant and recent. (2) Coverage. Covers all the intended scope. (3) Traceability. Every cost element must have an auditable cost basis. (4) Logic. The numbers in a cost estimate are only half the story. How numbers arise or are derived from a given set of data and assumptions can be a matter of expert judgment.

7. Basic Characteristics of Credible Cost Estimates (1)Clear identification of task (2) Broad participation in preparing estimates (3) Availability of valid data (4) Standardised structure for the estimate (6) Provision for project uncertainties (7) Recognition of inflation (8) Recognition of excluded costs (9) Independent review of estimates (10) Revision of estimates for significant project changes

8. Overarching steps to Cost Estimation

9. Overarching steps to Cost Analysis

10. Estimation Challenges -End users may not know what they want. -Requirements may change over time. -Costs are difficult to estimate for unproven technology. -There is tendency in contractors to provide optimistic cost and schedule information in order to win the job.

11. Analysis Challenges -Understanding scope and cost drivers. -Understanding the risks, particularly “unknown unknowns”. -Ensuring all scope has been covered off. -Ensuring all cost elements are included within the cost estimate. -Understanding the impact of the project on other projects or existing systems.

12. Summary of Comparison -Cost estimation and cost analysis are very similar however the focus of the task is very different. -Cost estimators build up using suitable and relevant data. -Cost analysts deconstruct, testing the assumptions, and data sources. -Both are vital to ensure a well sourced and documented cost estimate that can be trusted to make project and financial decisions. -However project uncertainties and environmental changes must also be considered.

13. Analysis in Context Presenter: Dan Hoy

14. Cost Analysis compares and contrasts Cost Estimates against each other as a form of validation. –Allows an opinion to be formed about the quality of the Cost Estimate. –Allows an opinion to be formed about the Cost Estimation Process. When to release costs. Who to release costs to.

15. Cost Analysis contextualises Cost Estimates so that decisions can be made based on a fuller picture. –Broad Environment –Immediate Environment

16. Broader Environmental context is complex and dynamic –Political: Government Regulations, Incentives. –Economic: National or International build. –Social: Reputation of other countries regarding human rights, environment. –Technical: Obsolescence

17. Immediate Environmental context also has an influence. –Project funds availability. –Project dependencies. –Competing projects.

18. Cost Analysis uses qualitative judgements to adjust Cost Estimates to improve predictive value. –Supporting documentation. –Competing judgements. –Qualitative judgements are affected by risk profiles

19. Risk Profiles

21. Same profile different consequences.

22. Cost Analysis adds the most value when it is done independently. –Cost Estimate is validated against alternative estimates. –Risk profile can be adjusted to reflect that of the decision maker. –Cost Estimate can be presented in the context relevant to decision makers.