Title: Walt Cooper Cost Analysis Improvement Group CAIG Office, Secretary of Defense
1Walt CooperCost Analysis Improvement Group
(CAIG)Office, Secretary of Defense
Project Cost Estimating
November 14, 2006
2Purpose
To describe the Cost Analysis Improvement Group
(CAIG) and its methods for developing independent
cost estimates. Case study Pentagon
Reconstruction and Renovation.
3About the CAIG
- Established in January 1972 by Secretary Laird
- Responsibilities
- Conducts independent cost estimates of Major
Defense Acquisition Programs and selected other
capital projects - Principle advisor to Secretary of Defense on
matters concerning program life-cycle costs - Functions in addition to cost estimating
- Cost research
- Training Annual Department of Defense Cost
Analysis Symposium - Data and analytic resources
- Visibility and Management of OS Costs (VAMOSC)
- CAIG Library
Required by Title 10, Section 2434.
4CAIG Structure
- Staff size 30 full-time equivalents
- About 50-55 CAIG estimates per year
- 1 to 4 analysts per estimate
- Average time commitment per cost estimate
- 6 calendar months
- 8 to 10 man-months of effort
- 4 man-months for lead
- 4 to 6 man-months for others combined
- About 7 man-years in functions other than cost
estimating
5Pentagon Reconstruction and Renovation (PENREN)
- Begun in 1998
- Experienced rapid increase in costs
- Congress established a ceiling on total costs
2 billion - Pentagon reconstruction after September 11 attack
highly accelerated program - CAIG directed to develop independent cost
estimates - Examine costs of recovery and reconstruction
after September 11 attack - Determine likelihood of further cost growth that
would exceed Congressional cap - Make appropriate management recommendations
All costs in FY 2001 constant dollars
6PENREN Phasing Plan
Phoenix
7Phoenix/Wedge 1 Recovery
- 2 million ft2 reconstructed
- Peak workforce 3,000
- 87 contractors and sub-contractors
8Estimating Approach
- Documentation narrative description (results of
contract analysis, interviews, etc.), drawings
and specs - Base estimate on parametrics (e.g., cost per
mens bathroom), factors (e.g., scaling for
acceleration), concentrating on areas of greatest
cost risk
9Phoenix/Wedge 1 RecoveryConclusions
- Results
- PENREN estimate 472 million for portion of
project based on drawings and specifications - CAIG estimate 425 million for same scope (10
less than PENREN) - Project Managers estimate reasonable, with the
following issues that caused cost growth from
project inception - Missing scope in work definition
- Inefficiencies in construction process
- Clearances for workers
- Relocation of Pentagon employees
- Contract perturbations
10Wedges 2 through 5
11About Wedges 2 through 5
- 20,000 employees to be moved
- Removal of 332 million lbs of debris
- 115 million lbs of hazardous materials
- New building elements
- Energy-saving building elements/materials
- Smart Walls
- Elevators and escalators
- Thermal insulated and blast-resistant windows
- Security upgrades
12PENREN Phasing Plan
Phoenix
13Estimating Approach
- Develop detailed space models for each space/type
function - Wedge 2 core and shell drawings
- Tenant space plans
- Space type narratives
- Contracts
- Analyst judgment
- Developed cost estimate for each space/function
type on square foot basis - Direct costs
- RS Means, Inc.
- Engineering judgment
- Prevailing wage rates for trades
- Indirect costs Standard industry mark-ups and
complexity factors to obtain indirect cost
14Work Breakdown Structure
15Wedge Cost Estimates
Wedge 2
Wedge 3
Wedge 4
Wedge 5
Notes 1. CAIG is extrapolation from Wedge 1
actuals bottoms up estimate forthcoming 2.
CAIG has not addressed information management and
technology or acceleration in depth
16Additional Analyses
- Top Down look
- Used actual cost from pre-9/11 work to determine
a unit cost - Simple Excel worksheet used
- Compare to analogous building renovations
- Department of Justice
- Seven year project
- 100 million
- Naval Sea Systems Command Headquarters
- Historical building
- 1,000,000 ft2
- 192 Million
Wedge Cost by Space
Pentagon Factor
17Wedge Costs by Space Type
400.00
350.00
300.00
250.00
Not Occupiable
C Space
FY01 M
200.00
SP Space
150.00
O Space
100.00
50.00
0.00
1
2
3
4
5
Wedge
18The Pentagon Factor
300
Hazardous materials
Remote Delivery Facility, clearances
250
Walls, enhanced sprinkler systems, signs
200
Special purpose areas, command centers
FY 2001 /ft2
150
Abatement of hazardous materials
Security
100
Force protection
Basic design and construction
50
0
DoJ
NAVSEA
Extrapolation From Wedge 1
19Growth in Wedge Cost Estimates
20Wedges 2 through 5Conclusions
- PENREN PMO estimates for Wedges 2 through 5
higher than CAIG estimate by about 10 - CAIG estimate consistent with comparisons to
actual costs of other major renovations in Metro
DC area - High level of contamination
- Significant force protection and security
measures - High proportion of expensive command and
operations space - Program likely to remain under Congressional cap
21Recommendations to Senior Leadership
- Support current obligational authority for
Phoenix/Wedge 1 Recovery - Propose alternative estimate in FY 2004 Budget
Review to adjust current PMO estimate for Wedges
2-5 - Establish PENREN Cost Analysis Team
- Review all major changes to the Wedge 2 contract
prior to implementation - Address cost growth in Information Management and
Technology and from acceleration of work
22Some Take-aways
- A clearly defined and described program is
essential. We require a Cost Analysis
Requirement Description (CARD) before doing any
estimate. - We base estimates on thoughtful analysis of
actuals. - You cannot cost what you cannot see.
- Talk to program managers
- Talk to contractors
- See the equipment/project
- We consider independent cost estimating as
inherently governmental. No contractors,
except in cases where we lack technical
expertise. - Understand contractors position when evaluating
plans/estimates. - Understand leaderships position when providing
recommendations.