How can Space East members achieve accurate estimation and control of costs?

Posted on November 19, 2024

Article by DADA Enterprises

Aerospace, and space, cost estimating remains a blend of art and science, given that many variables drive mission costs, and that many space projects are one-of-a-kind R&D ventures. Historical data suffers from cloudiness, interdependencies, and small sample sizes.

A 2023 U.S. Government Accountability Office (GAO) report shows that…

NASA’s portfolio of major projects in development sustained $7.6 billion in cost overruns in 2023.

Fig 1 NASA historical Cost Performance

How can Space East members achieve certainty over their project out-turn costs?

Accurate estimation and control of costs poses a particular challenge, especially when in the business of developing something never achieved before.

As a high degree of accuracy remains elusive, how can Space East members achieve certainty over their project out-turn costs?

The cost estimator must select the most appropriate cost estimating methodology (or combination of methodologies) for the data available to develop a high-quality cost estimate. The three basic cost estimating methods are (1) analogy, (2) parametric, and (3) engineering build-up (also called “grassroots”) as well as extrapolation from actuals using Earned Value Management (EVM) to understand how much ‘value’ is being delivered.

The management of complex leading-edge programmes holds many difficulties. As spacecraft and mission designs mature, there are many issues and challenges to the cost estimate, including:

Basic requirements changes.
Make-it-work changes.
Inadequate risk mitigation.
Integration and test difficulties.
Headcounts pressures, especially reluctance to reduce after peak.
Inadequate insight/oversight.
Development difficulties and Manufacturing breaks
De-scoping science and/or operability features to reduce nonrecurring cost:
1. Contract and design changes between the development and operations phases.
2. Reassessing cost estimates and cost phasing due to funding instability.

To put an accurate price tag onto space projects, early awareness of costs, identification of risks, and their estimation of potential cost impacts, NASA uses Concept Maturity Levels (CMLs) to advance mission concept designs and assess their progress. These levels help guide concept teams through formulation progression before the Preliminary Design Review (PDR). The Technology Readiness Level (TRL) framework, on the other hand, ranges from TRL 1 (Basic Principles Observed) to TRL 9 (Actual System Proven in Operational Environment).

We can then summarise these Concept Maturity Levels (CMLs) into the Major Phases of a Project to identify the most appropriate cost estimating method at different phases of a mission:

Phase A/B: Technology and concept development
Phase C: Research, development, test and evaluation (RDT&E)
Phase D: Production
Phase E: Operations

Certain methods are appropriate based on where the project is in its life cycle.

The type of cost estimating method used will depend on the adequacy of Project/Program definition, level of detail required, availability of data, and time constraints. The analogy method finds the cost of a similar space system, adjusts for differences, and estimates the cost of the new space system. The parametric method uses a statistical relationship to relate cost to one or several technical or programmatic attributes (also known as independent variables). The engineering (or Grass-Roots) build-up is a detailed cost estimate developed from the bottom up by estimating the cost of every activity in a project’s Work Breakdown Structure (WBS). The table below presents the strengths and weaknesses of each method and identifies some of the associated applications.

The cost estimator must select the most appropriate cost estimating methodology (or combination of methodologies) for the data available to develop a high-quality cost estimate.

Steps to getting started generating a cost estimate for early Concept Maturity Levels (CMLs) 1-5:

Know what type of mission you want to estimate cost for (Earth orbiting, planetary, observatory, etc.)
Choose your cost model to estimate cost:

Instrument – NASA Instrument Cost Modelling Tool (NICM)
Spacecraft – SSCM (Aerospace Small Spacecraft Cost Model), PRICE (True Planning, NASA Space Mission Catalog), and NASA Project Cost Estimating Capability Tool (PCEC).

Model inputs, such as mass, to construct Cost Estimating Relationships (CERs). This could be like missions, spacecraft, power, Payload instrument type (telescope, remote sensing, etc.)
Compute point estimate for:

Space segment (spacecraft bus and payloads)
Launch segment (usually launch vehicle commercial purchase)
Ground segment, including operations and support

Employ complexity factors, and learning curve, as an adjustment to a CER to compensate for a project’s unique features, not accounted for in the CER historical data.
Uncertainty in parametric cost models can be estimated using probability distributions that are summed via Monte Carlo simulation.
Cost phasing (or spreading) takes the point-estimate derived from a parametric cost model and spreads it over the project’s schedule, resulting in the project’s annual phasing requirements.

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