DHS Cost Analysis Overview International Cost Estimating and

DHS Cost Analysis Overview International Cost Estimating and Analysis Association Katie Geier Noreiga Director Office of the Chief Financial Officer Cost Analysis Division Tuesday July 11, 2017

Agenda • • DHS Organization Ten Years of Cost at DHS CAD Overview Agile Acquisition Efforts LCCE Review Board Program Affordability Independent Analysis Additional Opportunities for Estimating Improvements Chief Financial Officer July 11, 2017 2

US Department of Homeland Security CAD located here Chief Financial Officer July 11, 2017 3

Management Directorate Chief Acquisition Officer Represented on Acquisition Review Board in addition to Budget, CAD, PA&E JRC, PARM, Policy, OSE and T&E Chief Financial Officer July 11, 2017 4

There are five homeland security missions: Chief Financial Officer July 11, 2017 Prevent terrorism and enhancing security; Secure and manage our borders; Enforce and administer our immigration laws; Safeguard and secure cyberspace; Ensure resilience to disasters; 5

DHS Acquisition Program Profile • 12 Components • 140 Total Programs – 54 Major Acquisition Programs – 20+ at various pre-acquisition stages • Air, Marine, Terrain, Sub-terrain, Entry, Exit, Goods, Passengers… • IT Systems (Financial, HR, Case Management, Immigration, Transformation) • $60 B annual budget – ~$40 B is discretionary; – $18 B is spent annually on programs in both acquisition and sustainment Chief Financial Officer July 11, 2017 6

Evolution of Cost Estimating at DHS CFO: CAD PARM: RAD & CE&A COE CPO: CAD CPO: APMD Cost analysts within APMD; responsible for “quick looks” of programs Findings inform the LCCE requirements for D-102 2007 -2008 Chief Financial Officer July 11, 2017 Validating LCCEs for Level 1 Programs 4 Approved LCCEs Authorized to conduct ICEs as directed by USM/DUSM CAD representation at ARBs 2009 - 2010 CAD merged w/ APMD; -LCCE review/approval role goes to Risk Analysis Division in PARM Cost estimating support and guidance becomes focus of CE&A COE PARM: CE&A COE LCCE review/approval roles realigned to CE&A COE SMEs are collocated with Component CAE offices to better engage Program LCCE efforts 20 Approved LCCEs Approving LCCEs for Level 1 & 2 Programs Conducting ICEs and ICAs Components implementing a self-sustaining CE capability CAD representation at ARBs and PBR All Major Acquisitions have approved LCCEs Improvements achieved greater outreach, awareness, and analytical rigor 2011 -2012 2013 -2014 June 2014 -June 2017 Cost Estimating Has Matured Significantly Over the Past 10 Years But Much Work Remains! 7

About the Cost Analysis Division Mission: Cost Analysis Division (CAD) will provide objective cost estimates and cost analyses to enable DHS acquisition and resource decision making to support the mission. Chief Financial Officer July 11, 2017 Vision: • Enhance the credibility of Life Cycle Cost Estimates (LCCEs) in support of acquisition and resource decisions • Support Components with developing a self- sustaining cost estimating capability • Create an Independent Cost Estimating capability for DHS 8

CAD Roles & Responsibilities • Provide objective cost estimates and cost analyses to enable DHS acquisition and resource decision making. – Principally advise the Under Secretary for Management (USM), Chief Financial Officer (CFO), and Component Acquisition Executives (CAEs) on cost estimating and analysis – Lead the Department in cost estimating and analysis policy, policy implementation, and guidance. – Develop Independent Cost Estimates (ICEs) and assessments of Level 1 and Level 2 Acquisition Programs to inform the Acquisition Decision Authority. – Review, analyze, and evaluate LCCEs and ensure the cost of DHS programs are presented to the Acquisition Decision Authority accurately and completely. – Advise the Homeland Security Acquisition Institute (HSAI) on career field certification, training, and education for the cost estimating and analysis community. Chief Financial Officer July 11, 2017 9

Cost Estimating Success • Since June 2014 CAD has: – Met the Department’s goal for 100% of major acquisitions programs to have approved LCCEs — for the first time in DHS history – Delivered five independent cost estimates and one independent cost assessment; proof that DHS is maturing its estimating capability 2 years ahead of schedule – Developed and instituted a repeatable process for examining affordability of major acquisition programs – Established policy requiring maintenance of LCCEs annually – Developed/Instructed course on Intermediate Cost Estimating available for all Federal Government employees – An elevated leadership position and planned staff size growth from 10 to end strength of 29 by FY 23 – Cost estimating function now represented at both the Acquisition Review Board (ARB) and CFO Council for the Program and Budget Review (PBR) – Established avenue to explore path forward to collect cost data for acquisition programs Chief Financial Officer July 11, 2017 10

Major CAD Initiatives • Independent Cost Estimates (ICEs) and Independent Cost Assessments (ICAs) • Piloting new LCCE ideas w/ Agile Software (S/W) Development Acquisition Integrated Project Team (IPT) • Maintaining policy, guidance, and development of training courses • Focus on collecting high quality and reliable cost data • Annual LCCEs • Program Affordability • Piloting LCCE Review Board Chief Financial Officer July 11, 2017 11

CAD's Efforts Toward Agile Pilot Goals • Reduce Cycle Time to achieve Acquisition Framework Milestones – Active Engagement with Component Agile Pilot Programs and Agile Acquisition IPT – Agile Acquisition Action Plans • Driving organizational change and process improvement for DHS IT Acquisitions and Delivery • ~18 action plans addressing the Acquisition Lifecycle Framework policy and governance, Requirements, Ao. A, LCCE, Testing, Cybersecurity, S/W Delivery and Agile Maturity Models, Automated Tool capabilities • Streamline Artifact Processes – Simplified model development and documentation • Enabling Best Practices – Chartered Member of the Agile Acquisition Working Group (AAWG) Metrics sub IPT • Agile Acquisition Software Delivery Core Metrics developed – ~20 metrics addressing size, velocity, testing, quality, value and cost • DHS Agile Acquisition Delivery Metrics Playbook under development Chief Financial Officer July 11, 2017 12

LCCE Review Board • Informs Stakeholders about the program’s LCCE being assessed by CAD – Component Stakeholders: CFO, CIO, CAE and Program Management Office. – DHS HQ Stakeholders: OCFO Budget and PA&E, OCIO CTO, S&T OSE and PARM • LCCE Review Board Meeting should be held at least 60 days prior to an ADE • Program Office briefs: – Program Overview: System Overview / Architecture, Acquisition Strategy, and High Level Schedule. – LCCE Results • Ground Rules & Assumptions • Basis of Estimate for Cost Drivers in Investment and O&M • Risk • Affordability • APB • Intended outcome is to address any stakeholder issues prior to Component LCCE approval. Chief Financial Officer July 11, 2017 13

Policy Update – LCCE Review Board Required for all Level 1 and 2 acquisition programs seeking an ADE 2 A or later. PMO Cost Lead having Cost IPT with Stakeholders Present to LCCE Review Board Approved LCCE Scorecard and Memo from DHS OCFO Notes • CAD recommends that the LCCE Review Board occur prior to Component Routing for LCCE Approval. • To mitigate substantial LCCE Review Board comments the PMO Cost Team Lead should have Cost IPT with Stakeholders in preparation for Final LCCE Review Board • LCCE Review Board will aid facilitating FITARA requirement of having CIO review LCCE Chief Financial Officer July 11, 2017 14

CAD Independent Cost Assessments (ICAs) • Quantitative cross check of LCCE results - integrated into CAD’s review and approval of LCCEs • Used as decision support to senior leaders – focus on the quality of an LCCE, potential for future cost growth, mitigation strategies for cost risk at Program ADEs and/or during PBR – Consider all phases but focus on FYHSP with a keen eye towards the current year, budget year, and budget year +1 for critical showstoppers • Analysis aimed to assist programs in achieving successful results – ICA is not intended to catch bad programs or force CAD positions for affordability. – Engage with technical authorities (e. g. CIO, OSE) to gain an independent technical assessment of program assumptions to further develop credibility in the ICA results. Chief Financial Officer July 11, 2017 15

CAD Independent Cost Assessments (ICAs) cont’d • Present the findings with potential solutions and recommendations to improve the management of program cost and enhance the probability of program success. • ICA results can: • Result in ADM Action Items to improve program management practices • Mitigate risks • Manage cost uncertainty Chief Financial Officer July 11, 2017 • Establish better APB measures • Identify a path towards more affordable outcomes in future budget decisions. 16

Program Affordability • GAO Audit 16 -338 HOMELAND SECURITY ACQUISITIONS: DHS has Strengthened Management, but Execution and Affordability Concerns Endure – Recommendation #4: Require components to establish formal, repeatable processes for addressing major acquisition affordability issues, similar to the process TSA [Transportation Security Administration] has established. Chief Financial Officer July 11, 2017 17

Program Affordability cont’d • Prior to an ADE, Components should discuss the unconstrained requirements based LCCE with regard to available funds during the Component LCCE review and approval process – If available funds are insufficient, the Component must decide whether to: a. descope requirements; b. extend the schedule; or c. additional funding to make the program affordable in the context of other Component priorities • This review should result in an affordable LCCE that documents the changes made to fully resource the program and the impacts/risk those changes have on the program. – A synopsis of those changes shall also be documented in the SFO’s certification of funds memo. – The constrained (affordable) program is the official LCCE submitted for CFO approval and shall form the basis for the programs’ APB as well as future Component resource allocation plans Chief Financial Officer July 11, 2017 18

Additional Opportunities for Improvement • Breadth and Depth of CE Community – CAD identified a gap of 46 FTE cost estimators (19 onboard + 46 gap = 65 needed FTEs) based on the guideline: • At least 1 full time equivalent Fed (GS-1515 series with a Level III BCE certification) for each CAE/CFO office in a Major Operational Component (e. g. the Big 7 + NPPD) • At least 1 full time equivalent Fed or Contractor (with cost estimating certifications) per Major Acquisition program that is pre FOC • Engagement of stakeholders during LCCE development – Robust programmatic and technical description – Buy in on scope of program to be estimated, ground rules and assumptions and data – Cost Review Boards and Presentation to Management – Affordability Chief Financial Officer July 11, 2017 19

Next Steps for DHS CAD • Deliver ICAs – provide CFO with HQ perspective • Continued engagement with the CIO/PARM on acquisition improvements • Collect software metrics for agile pilot programs • Instruct HSAI Learning Cafes and Courses – Supplement DAU courses • Continue work with DHS CXOs on data collection efforts • Evaluate Annual LCCEs and integrate with Program Budget Review for Affordability Analysis • Institutionalize the LCCE Review Board Chief Financial Officer July 11, 2017 20

Katie Geier Noreiga Katie. geier-noreiga@hq. dhs. gov 202 -447 -5209 21