Forecasting The Future & Reflecting On The Past

Transcription

1 Military Air & Information Forecasting The Future & Reflecting On The Past SCAF 18 th September 2012 BAE SYSTEMS PLC 2012 All Rights Reserved The copyright in this document, which contains information of a proprietary nature, is vested in BAE SYSTEMS Public Limited Company. The contents of this document may not be used for purposes other than that for which it has been supplied and may not be reproduced, either wholly or in part, in any way whatsoever, nor may it be used by, or it contents divulged to, any person whatsoever without the prior written permission of BAE SYSTEMS Public Limited Company 1

2 Introduction & Background Mick Porter, Director of Estimating Capability and Independent Cost Evaluation BAE Systems, Military Air & Information (MAI). Chairman of the BAE Systems Corporate Estimating Forum. Joined, the then British Aerospace - Military Aircraft Division, as a graduate in 1986 and have had a number of roles covering Commercial, Estimating and Procurement but roots very firmly established in the Estimating discipline. Educational background in Mathematics at Warwick University. 2

3 Military Air & Information BACKGROUND 3

4 Military Air & Information (MAI) Key facts Approx. 13,000 people 2011 Turnover of c. 4bn Organised as 3 lines of business Combat Air Defence Information, Training & Services F-35 Our Mission: Working as an integral part of the team delivering information superiority and effective air power, our aim is to give real advantage to our customers worldwide. Trusted to deliver - always 4

5 MAI - Footprint 5

6 MAI a proven track record We have supplied most of the UK s fixed wing fleet We have a track record of partnering with the UK customer to support inservice aircraft We develop long established relationships with our overseas customers We underpin the performance and safety of the solutions we provide Proven capabilities in: Prime contracting Rapid engineering Systems integration Manufacturing Maintenance repair and upgrade Military training Information systems and services 6

7 MAI Organisation Structure Managing Director Commercial & Procurement Director Managing Director, Combat Air Managing Director, Defence Information, Training & Services Engineering Director Finance Director Chief Counsel Human Resources Director Military Advisor Business Development Industrial Capability Director Senior VP, F-35 Director Maintenance & Support Director Strategy Director Commercial & Procurement Director Communications Director Commercial Estimators deployed in the businesses Director ECD & ICE 7

8 Military Air & Information FORECASTING 8

9 Forecasting for Success What is Forecasting? A planning tool that helps management in its attempts to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends. Forecasting starts with certain assumptions based on the management's experience, knowledge, and judgment. These estimates are projected into the coming months or years using one or more techniques. Since any error in the assumptions will result in a similar or magnified error in forecasting, the technique of sensitivity analysis is used which assigns a range of values to the uncertain factors (variables). A forecast should not be confused with a budget. Source BusinessDictionary.com Forecasting is the art of saying what will happen and then explaining why it didn t! 9

10 . and what is Success? Do we measure forecasting success by simply having an accurate forecast or do we measure success by being in a position to generate forecasts which will inform decisions and ultimately drive optimum solutions? Any failure can be treated as success provided that you learn from it! 10

11 Great Forecasters of the 20 th Century 11

12 Similarities between Forecasting Cost & Weather Michael Porter Michael Fish Cost (Forecaster) Estimator Weather Forecaster (Estimator) BUT WHAT ELSE DO WE HAVE IN COMMON? 12

13 Highly Complex Systems Eurofighter Typhoon Avionic System Architecture Weather map showing Hurricane Katrina August 26, (US National Weather Service) Responsible for forecasting highly complex systems. 13

14 Stakeholders Significant stakeholder interest. 14

15 Climate Change JANUARY: ARAB SPRING BEGINS MARCH: ACTION AGAINST LIBYA MARCH: JAPAN DISASTER MAY: OSAMA BIN LADEN KILLED AUGUST: US CREDIT DOWNGRADE SEPTEMBER: EUROZONE CRISIS OCTOBER: CROWN PRINCE SULTAN DIES DECEMBER: US-IRANIAN TENSIONS JANUARY: US DEFENSE STRATEGY 2011 Constantly dealing with climate change. 15

16 Short Term / Long Term Short term and long term forecasting. 16

17 Publicity / Reputation Earlier on today apparently a lady rang the BBC and said she heard that there was a hurricane on the way. Well don't worry, there isn't. Michael Fish 1987 High profile publicity when forecasts prove to be incorrect. 17

18 Differences between Forecasting Cost & Weather COST V WEATHER Limited relevant historical data A wealth of relevant historical data available. available. Mixed legacy systems in place to Systems in place to routinely collect performance data with appropriate context inconsistent. measure performance and collect information consistently. Limited investment in the Long term investment in development of forecasting tools and techniques. development of forecasting tools and techniques. Not very agile Slow process. Agile Hourly forecasts. BUT BUT Whatever a cost forecaster produces CAN impact and change the future. Results can INFLUENCE. Forecasting For Success. Whatever a weather forecaster produces HAS NO impact on what really happens. Results provide INFORMATION. Successful Forecasting. 18

19 So what can we learn from The Weatherman? We need to get smarter! Better data collection discipline and increased data exploitation More investment in developing capability Tools / Business Systems Techniques Process Increased agility and streamlined approach to forecasting e.g. parametrics and CER s Need to learn from the past.. Not live in the past! 19

20 So what can we learn from The Weatherman? We need to raise the profile of cost estimating as a career and a profession! More formalised training with recognised qualifications. Cost estimating recognised as a valuable part of the business. Increased influence in business decision making. 20

21 Military Air & Information A BACK TO BASICS APPROACH 21

22 When estimators did estimating... 22

23 what went wrong? 23

24 How has the role evolved in MAI? Historic Current Experience and knowledge driven approach. Process and checklist driven approach. Limited touch across the organisation. Full involvement and ownership through all levels of the business. Simple cost structures and models. Highly (overly) complex MS Excel spreadsheet models. Limited governance black art. Highly governed. BUT WHAT IS THE CORRECT BALANCE? 24

25 MAI Estimating Mission: To play the leading role in cost estimating and pricing activities within MAI and, through an awareness of cost and cost drivers, be active and influential in the shaping and approach to future business including programme and technical solutions 25

26 Culture / mindset change required across the business Functional Interaction Estimating Capability Route Map Joint working Short Term Establish organisation structure with the correct focus, leadership and authority for estimating capability issues. Develop improvement plans and gain ownership of issues and actions. Closer working with the operational functions. Focus on critical elements of E2E process. Interpretation. Medium Term Medium - Long Term Development and delivery of training with particular focus on existing gaps and bridging theory with practice (on-the-job, management support). Progressive establishment of relevant cost data (estimates & actuals) and context for use in near neighbour / comparative estimating. Streamline E2E process and DOA s within the business. Influential in solution development. Greater independence of view between functions / commercial estimating. Greater ability to generate estimates top down. Confidence in top down approach for bidding. Increased independence 26

27 Military Air & Information TRAINING & PROFESSIONAL DEVELOPMENT 27

28 Training Approach Foundation & Practitioner Training For Estimators. Bespoke tailored approach natural work teams. T5 Taking Training To The Teams Professional Accreditation. But still remember - there is no substitute for experience. 28

29 Professional Accreditation for Estimators A fundamental part of our vision is the development of our people. To this end we sought: Measurable competences and a support structure to promote their achievement. External professional accreditation at the individual and company level. We have worked proactively with the ACostE, ECITB and other organisations across Aerospace & Defence and Engineering Construction to develop: 1. A suite of National Occupational Standards (NOS) in Project Control, Estimating, Planning and Cost Engineering leading to Formal Qualification 2. Vocational Qualifications in Estimating, Cost Engineering and Commercial Support (QCF Diplomas at L3 and L5 evidence based). Peer Recognition With CPD 3. Tiered Approach to Professional Accreditation (also NOS based) Progression achieved by demonstration of appropriate academic, professional and applied knowledge and skills. Unitised Incremental Development. 1st UK Cohort (Pilot) International Pilot (Australia & KSA) 2nd UK Cohort Date L3 L5 Total Candidates QCF = Qualification & Credit Framework CPD = Continuing Professional Development 29

30 Military Air & Information DATA COLLECTION & EXPLOITATION 30

31 Data Collection Historical data is one fundamental ingredient to any cost forecast. Availability of relevant information is mixed and often difficult to compile and reconcile. Toolset issue? Process issue? Cultural issue? Ownership Resource 31

32 Making Use of Existing / Potential Data Sources Existing Data: Types of Data Source Value of Information Effort to Compile Request for Bid Approval Packs / Estimate Clearance Packs Medium Easy Finance Systems, General Cost Ledger, Contact Status Reports (CSR s) & Other Reporting Tools Contract Closure Reports / Lessons Learnt Documents / Cost Certificates Potential Data: ICE Team Data / Reports Medium to High High High Easy to Medium Medium to Difficult Easy to Medium Iron Mountain Archives Low Difficult Local Bespoke Data Collection Models Varied Easy Estimators Personal Files (Bottom Drawer!) High Easy to Medium Original Blue Estimating Handbook Medium Easy 32

33 Making Use of Established Processes Fading Memory Pre-Contract Contract Live Contract End RBA / Commercial Plan Estimate Clearance Phase 2A Documentation Contract / Contract Documents Contract Launch Pack Initial Budgets Phase 2B Documentation Contract Status Reviews Annual LCM Review Contract Amendments Contract Closure Final LCM (Phase 8) Final CSR Cost Certificate Lessons Learned SNAPSHOT As Is but difficult to construct or maintain a consolidated picture for the project lifespan. Need to link everything through the full LCM lifecycle. Knowledge Supplement existing documents with Annual Project Chronology Statement covering :- Project Narrative Key issues / risks over previous 12 months Financial narrative Rolling Year End CSR position with key changes to ETC, Risk Draw Down & Retirement, QMAC & Rates changes etc. Commercial Narrative (CMP rolling annex ) Key commercial activities, change proposals / contract amendments. Memory TIMELINE 33

34 Military Air & Information ADOPTION OF PARAMETRICS 34

35 Approach Currently developing a parametric capability in two areas :- Future Concepts Vendor Price Challenge / Benchmarking but.increasing demand from mature / established programmes Working with two toolset providers PRICE Systems Galorath Aim to develop local CER s. 35

36 Current Barriers Calibration / Confidence Out of the Box / Data Proving Black Box / Leap of Faith Not invented here! Culture Slowly but steadily building credibility 36

37 Conclusion THE CLIMATE IS TOUGH & DIFFICULT TO FORECAST - BUT WE MUST JOINTLY RISE TO THE CHALLENGE. 37

38 REAL PERFORMANCE. REAL ADVANTAGE. 38