To calibrate or not to calibrate that is
“To calibrate or not to calibrate that is the question” Presented by East. Wise Technology, Beijing, China 6/16/2021 Copyright 2004 RWF Consulting 1
Does the PRICE models need to be calibrated? • Yes • No • Sometimes 6/16/2021 Copyright 2004 RWF Consulting 2
If no calibration is needed, why not? • • “It is fine the way it is. ” The answers are reasonable. There is no reason to complicate the process. Calibration would “skew” the results if you are doing a “should cost” estimate. “Most historical data is flawed in some way”. Finding out how much something was built for in the past does not necessarily relate to what you can build it for the next time. Many practitioners rarely change the settings. 6/16/2021 Copyright 2004 RWF Consulting 3
If yes it needs calibration, why? • • Our company (agency) is unique. We do things differently. Our products are one of a kind. The old “Not invented here” (NIH) syndrome, so it must be modified (changed) to be any good. 6/16/2021 Copyright 2004 RWF Consulting 4
When should you calibrate and when should you not calibrate the PRICE models? • Probably not when you are evaluating subcontractor bids. • Probably not when you are setting targets for a engineering estimate. • Probably should if you have ongoing programs and you need very accurate projections. • Probably not if you are doing an independent estimate or are trying to figure what the competition will bid. • Probably not if the data is flawed in some way. 6/16/2021 Copyright 2004 RWF Consulting 5
How do I calibrate the PRICE models? • By running ECIRP, PRICE spelled backwards (run a calibration). • By changing the Global settings - by always using a Global setting not equal to 1 in original input. 6/16/2021 Copyright 2004 RWF Consulting 6
Adjusting the macros (Globals): • For example if you are a systems engineering firm, your systems engineering costs are probably higher than the number (average) costs that PRICE generates. You may wish to adjust the Global: System (Development Engineering System Engineering Cost Multiplier) to some number greater than 1 to reflect the actual cost. 6/16/2021 Copyright 2004 RWF Consulting 7
Running ECIRP: • ECIRP(ing) is an interative process based on weights and costs, producing Manufacturing Complexities: • MCPLXE (electronics) and MCPLXS (structure) are computed to satisfy the following relationship: MCPLXE/S = function(wt, cost) 6/16/2021 Copyright 2004 RWF Consulting 8
ECIRP process flow: 1. Run ECIRP and compute initial MCPLXE/S 2. Run PRICE (forward) to obtain costs with computed MCPLXE/S. 3. Compare costs between ECIRP input and PRICE (forward) output. 4. If cost difference is acceptable (plus or minus 1%) then record computed MCPLXE/S values. 5. If cost difference is unacceptable then iterate until differences are equal to plus or minus 1%. 6/16/2021 Copyright 2004 RWF Consulting 9
In summary: • Sometimes you should calibrate the PRICE models and sometimes you should not depending upon the circumstances. • Calibration only applies to Manufacturing Complexities and/or Globals. • Financial factors are not a part of calibration since they are input to the PRICE models with separate financial factors for each financial environment. 6/16/2021 Copyright 2004 RWF Consulting 10
Word of thanks: • Thank to Mr. Kelly Chamberlain of Mc. Donnell Douglas for making this presentation possible. • This talk was originally presented by Mr. Chamberlain at the PRICE Users Symposium, San Francisco, California, USA) 6/16/2021 Copyright 2004 RWF Consulting 11
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