Fortune Telling, Estimating & Systems Engineering

Abstract

AbstractEstimating the cost of a system is an essential aspect of Systems Engineering. Both the recurring and non‐recurring costs will need to be understood before a business can make a commitment. Often systems will be constrained by affordability and when the system will be needed and such constraints will need to be understood by the Systems Engineer. There is little point developing a system that will take too long to build and would likely bankrupt the company or customer. So a Systems Engineer will also need to explore trade options to optimize the system for cost and schedule.Fortune tellers profess to know the future and assure business leaders that the system is a good idea and will be affordable. Evidence presented in this paper shows that fortune telling can be inaccurate and that unless robust estimation practices are applied, most systems will overshoot their budgets and deadlines. Often it is too late when a business finds out the true cost of the system they are committed to. A Systems Engineer must employ proven estimating practices if they are to avoid customer dissatisfaction and business lossesSuccess leaves clues and successful estimates are no accident. Success is defined here as an accurate estimate, one where the final system costs and schedules come in acceptably close to the estimate.When we asked Systems Engineers for their views on the factors that lead to an accurate estimate, we hear answers like; clear requirements, accurate historic data, and robust estimation techniques. But how important are these and is it possible to quantify their value, their contribution, towards a successful estimate?The authors developed a calibrated scoring mechanism to quantify the “maturity” of an estimate to help business leaders understand the “goodness” of an estimate before they make a commitment. The concept is called Estimate Readiness Level and is a score between 1 and 9 representing the maturity of the estimate. This paper summarizes how the authors calibrated the Estimate Readiness Level assessment so that business leaders can now predict the risk and uncertainty in an estimate before the project launches, and therefore be confident that the system being proposed is affordable and that the business case can be believed.