Math is EZIE: How Contracts Help Control Cost

Abstract

The aerospace cost estimating community relies on risk analyses to estimate confidence in a project's budget. At a NASA mission's preliminary design review (PDR), convention requires that baseline cost confidence plus project-held reserves should be around the 50 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> percentile and cost plus project-held reserves and unallocated future expenses (UFE) should be around the 70 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> percentile of the joint distribution of total cost and schedule. But how can we test whether our approach to determining 50 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> and 70 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> percentiles for missions going into PDR is reliable? An analysis of historical costs from past NASA missions shows that there is an 84 % chance that a mission will experience cost growth from PDR to Launch. At the empirical 50 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> and 70 <sup xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">th</sup> percentiles, NASA missions are spending their full budgets plus 16% and 27 %, respectively. But does this change when we compare in-house spacecraft builds to contracted builds? As more commercial hardware options become available, NASA missions have relied on various cost contracts, particularly cost-plus (CP) contracts and firm-fixed-price contracts (FFP). In May 2022, the Electrojet Zeeman Imaging Explorer (EZIE), passed its PDR. EZIE is just one of many recent examples of NASA using commercially available hardware and FFP contract vehicles to control costs. With carefully designed science techniques that take advantage of commercial off the shelf (COTS) hardware from Blue Canyon Technologies, EZIE will be able to collect groundbreaking science for a lifecycle cost of $57.5M (FY22). To ensure the success of the EZIE mission, NASA must allocate and budget adequate funding. In this analysis, actual costs of NASA missions with contracted spacecraft are compared with actual costs of NASA missions with in-house builds. Comparisons are made between contract start estimate and final delivery costs. This paper will allow us to examine the NASA cost community's approach to reserve postures, particularly when contracts are employed. Using the empirical dataset as our guide, how can projects approaching PDR provide cost and schedule analysis that supports the goal of achieving 70% confidence in the budget at the portfolio level?