Choosing the options : mystery or method ?

Society for Cost Analysis & Forecasting Workshop 21 April 2010

George Pickburn FORS FIMA CDipAF

gapickburn@dstl.gov.uk

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28 April 2010

Everyone talks about the weather

but nobody does anything about it.

Mark Twain

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

SITREP

• Resource allocation studies – structured approach• Rigorous Operational Research methods for benefits

measurement & optimisation• Costing well understood (?)• Endorsed at top level – the Combined Operational

Effectiveness & Investment Appraisal (COEIA) in MOD• But . . . . Whence the options?

– Scope for manipulation– Entryism at programme level

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

Resource Allocation Study

Understand client domain

Identify client’s values and the benefits he seeks

Propose methods to evaluate benefits

Instantiate the methods - modelling

Execute the methods

Trade evaluated benefits with costs

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

Resource Allocation Methods

• Extensive suite of techniques . . . .

• . . . all grounded at conceptual / theoretical level

• . . . structured, explainable, approaches

• . . . yielding quantitative assessments

• . . . benefits measurement

• Optimisation methods . . .

• . . . well developed

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28 April 2010

Cost estimation

• Highly developed – management accounting paradigm

• But with question marks . . .– time horizon ?

– “through – life” ?

– inflation ?

– technology insertion ?

– ‘private’ finance ?

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28 April 2010

Integration of benefit and cost

• Combined Operational Effectiveness and Investment Appraisal : COEIA

• Benefits = “Effectiveness” (non-financial effects)

• Cost = Net financial consequences

• HM Treasury approved – leading to delegated powers

• Congruent with evidence based policy

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28 April 2010

COEIAOperational

Effectiveness / Benefit

Net Cost

A

B

E Do Nothing

C Do Minimum

D

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

OperationalEffectiveness / Benefit

Net Cost

A

B

E Do Nothing

C Do Minimum

D

. . . with uncertainty

COEIA

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28 April 2010

How are the options chosen ?

• New / novel technology

• Professional / emotional attachment

• Pet rocks

• ‘Hidden’ characteristics

• ‘Conspiracy’ of optimism

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28 April 2010

Option ‘dimensions’ – PEMP-M

•Processes

•Environment

•Migration

•Procurement Mode

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28 April 2010

G. A. Pickburn 2001

G. A. Pickburn 2001

Environments

Processes

Migrationstrategies

Procurementmodes

Options1…2…3…....n …

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

Processes Dimension

• Key consideration in the implementation

• What is to be done (to achieve the declared objectives)

• Why doing it is important

• What are we trying to achieve ?

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28 April 2010

Environment Dimension

• Physical resources and conditions in which the system’s processes will be required to operate

• Includes people, buildings, information technology, transportation, . . . .

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28 April 2010

Migration Dimension

• How the system implementation with proceed from the current approach and arrangements to the desired future provision and organisation

• Linkage with other related projects

• Wider political considerations

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28 April 2010

Procurement Mode Dimension

• How the new arrangements will be resourced

• What relationships with potential suppliers of real resources (equipment, buildings, etc.)

• Partnerships?

• Provision of finance ?

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28 April 2010

Defence Lines of Development

Option Dimensions

Processes Environment Migration Procurement Mode

Training P P

Equipment ? P P

Defence Personnel P ? ?Lines Information P

of Doctrine P

Development Organisation ? P P

Infrastructure P ? ?Logistics P P

TEPIDOIL

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28 April 2010

Example

Processes Environments Migration Strategy

Procurement Mode

Centralised Bespoke Info Technology Big Bang In House

Distributed amongst Regional Centres

Paperbased Country by country

Conventional Acquisition

Federalised by Country

Spreadsheets & E-mail

Function by function

Partnership with Industry

Regional Independence CD exchange

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Defence Inventory Management

• Stock picture –comprehensive andcurrent

• Ownership• Services’ processes• IT ruggedness• Paper records• Extant arrangements• Role of industry

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28 April 2010

At-sea equipment repair

• Processes derive from equipment failure types

• On land / in harbour / coastal / open ocean

• Equipment development plans

• Who should own the capability?

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28 April 2010

Summary

• Options need no longer ‘emerge from the mist’

• Options dimensions enable open debate about objectives and values

• Processes / Environment / Migration / Proc Mode is a viable dimensions set :

– general purpose

– compact

– proven

© Dstl 2001Dstl is part of the Ministry of Defence

28 April 2010

G. A. Pickburn 2001

G. A. Pickburn 2001

Environments

Processes

Migrationstrategies

Procurementmodes

Options1…2…3…....n …

What are the options?