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Spring Newsletter
April 2015
INSIDE THIS ISSUE
Chairman’s Address ……………………….… 2
Next SCAF Workshop – 2nd June
Data Maturity and Application.. 3
SCAF Summer Reception and Awards
Dinner, …............................................. 4
Letter from the Editor ......................... 5
HTA – Aircraft Carriers – what
price QEC? …………………………..... 6
Report on the 2015 cost estimating
challenge workshop …..…………..……… 10
SCAF Annual Conference, QEII Centre,
Westminster, London …………………….. 13
Report on the Cost Analysis and
SDSR workshop ………………….…. 14
Forecasting the Obscure in austere times
……………………………………………………….… 16
Association of Cost Engineers (ACostE)
Notices ……………………………..…………… 18
SCAF Events later in 2015 …….. 22
Contacts .…………………………....…..……. 25
www.scaf.org.uk
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Spring Newsletter April 2015
CHAIRMAN’S ADDRESS
Hello and welcome to
this SCAF Newsletter,
as spring arrives and
the days are getting
longer the SCAF
committee have been
focused on the year
ahead. We have been
planning the events and workshops, trying to find
interesting and stimulating themes for the titles. If
you have a particular topic that you think would
merit a workshop please let us know?
events on the SCAF website, don’t forget to take a
look yourself.
In February we returned to RINA is London for a
workshop on SDSR. This was particularly well
attended and SCAF had a waiting list for people who
wished to attend. Due to fire regulations there is a
cap on the number of attendee that we could accept,
but we didn’t think it would be a problem, we will be
reviewing this capacity restriction for future events.
The speakers gave us the benefit of their experience
and knowledge across a number of different topics
and a successful event was enjoyed by those present.
Dale in the back of a C-17 taking a rest at AVALON.
With the General Election in May it is likely that a
strategic defence and security review (SDSR) will
follow. This is the background to the SCAF Challenge
that we have set this year; considered the SDSR and
its implications. There will inevitably be pressure on
the defence budget and the equipment that can be
acquired in the future. The committee and I wish all
the younger members of SCAF that are participating
in the SCAF Challenge this year good luck and I would
ask all the veterans (you know who you are!) to
support the teams in their preparation and on the
day when they are presenting.
On a personal note, I went to the AVALON air show in
Melbourne in February and gave a presentation. I
didn’t miss the opportunity to mention SCAF and
invited attendees at the 16th Australian International
Aerospace Congress (AIAC) to view our forthcoming
www.scaf.org.uk
At the last committee meeting we concluded our
voting for the SCAF awards in 2013/14 SCAF calendar
year. We will be holding the awards dinner in Bath
this year and it promises to be an exciting evening
with awards given for Best Newsletter article, Best
Quality presentation, Best Technical Presentation,
Innovation (PG Pugh) award and the Members award
based on highest score from feedback. Make sure
you attend as the winner could be you!
The future programme for this year is shaping nicely
with Preston and Bristol workshops in June and
November respectively also the annual Conference in
September at the QE II Conference Centre in London.
Enjoy the rest of the Newsletter and put the dates in
your diary.
We look forward to seeing you all at the SCAF events
throughout 2015.
Dale Shermon
SCAF Chairman
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Spring Newsletter April 2015
Next SCAF Workshop
“Data Maturity and its Applications”
Tuesday 2nd June 2015
The Conference Centre, Ribby Hall Village,
Wrea Green, Preston, Lancs
The validation and verification (V&V) of a cost model will ensure that it is error free and will mathematical
function correctly and it will represent the real world in terms of its functionality. However, it will consistently
produce validated and verified rubbish; if the data being entered is poor.
Core to the generation of a credible and justified cost estimate is traceable, mature data. There is no amount of
sophisticated analysis that will improve poor source data. We need cost and contextual historical data also
robust data regarding the future project, system or service that is being estimated.
So, where does this data come from? How do we gauge the maturity of the data we utilise? How do we use
data and what can it tell us? What can we do in the absence of data? All this and more will be considered in
this workshop. Our speakers include:

Dr Tony Powell, Co-Founder and Managing Director, York Metrics

Ed Smith, Central Estimating Functional Manager, Military Air & Information, BAE Systems

Dr Claire Taylor, Senior Consultant – Information Analyst, QinetiQ

Neil Harrison, PLM & Configuration Manager, Type 26 GCS, BAE Systems Maritime

Andy Nolan, Lead Analyst, Rolls Royce

Sanathanan Rajagopal, Senior Analyst, Cost Assurance and Analysis Service, DE&S, Ministry of Defence

Tim Brogan, Cost Estimating Lead, Jaguar Land Rover
Registration and Costs
Registration and coffee will be available from 09.15. The Workshop will commence at 10.00. The costs for
the workshop is £50.00 per delegate. A 10% discount is available for group booking of 5 or more delegates
and a 15% discount is available for group bookings of 10 or more delegates. These costs include all
refreshments, a buffet lunch and FREE attendance (subject to availability) to all future SCAF organised events
until August 2015.
Further details can be found on the SCAF website (www.scaf.org.uk) or by contacting the Secretary, Neil
Morrill by email at: [email protected] or call 030 6770 3450
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Spring Newsletter April 2015
SCAF Summer Reception and Awards Banquet
9th July 2015
Bailbrook House Hotel, Bath
Following our successful event last year the management
committee have again agreed to combine our traditional
summer reception with an awards banquet.
This evening event will be held at the prestigious Bailbrook
House Hotel commencing at 7.00pm. Attendance (including
dinner) at the event is FREE (subject to availability) to SCAF
members, their spouses and invited guests.
We would encourage everyone who wishes to attend to
register with the Secretary as soon as possible to avoid
disappointment. For those wishing to stay overnight, discounted rates are available and bookings should be
made directly with the hotel.
We hope that as many of as possible will attend and support this evening event.
Registration Details: Please contact the SCAF Secretary, Neil Morrill at [email protected] or
call 0305 770 3450 to reserve your place.
Where are we competition?
Wow, this one really got the responses going. My inbox started pinging
within hours of the newsletter being published. After the slow
response to the competition in the Autumn issue published in October
this was a very unexpected and pleasant experience.
The numbers of correct entries meant
that the barrel size had to be
increased significantly. May I thank
everyone who responded and my congratulations to Mark Burdett from
Thales whose name was the first drawn out of the barrel and correctly
identified it as the lovely village of Clovelly in North Devon.
This month’s front cover picture is a little more challenging and I’m sure
that it will send the investigating buds off in anticipation.
Please forward your answers to [email protected]. All the correct answers will be put is a barrel and the
winner will be published in the next newsletter and provided with a small prize.
www.scaf.org.uk
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Spring Newsletter April 2015
Letter from the Editor
By Arthur Griffiths, SCAF Newsletter Editor
The election campaign is now in full swing and we are bombarded by the spin and promises from all the
election parties. In some ways May 7th can’t arrive quickly enough. The latest polls suggest that we will have
a governing party with such a small majority that it will be unable to have any control in Parliament. The
result could be a snap election in autumn which may not resolve anything but would certainly cause chaos by
possibly having a 12-24 week Purdah on new government contracts – possibly half a year of contractual
stagnation. This may be good news for the cost analysts who could find themselves busier than ever in
response to managers who wish to know their costs in infinite detail during these austere times and Dale
Shermon’s article on page 16 seems to confirm this statement.
Brian Tanner’s article on the QE Aircraft Carrier cost is the last in the current series on the use of Historical
Trend Analysis for forecasting the cost of future programmes. However, I understand that Brian has a few
more interesting articles for us in the near future.
At the end of March we saw the USS Theodore Roosevelt visit
Portsmouth and was moored in the Solent for five days. This Nimitz
Class aircraft carrier is huge. At over 100,000 tons and carrying 90
aircraft this £12Bn capital asset was definitely the main attraction at
Stokes Bay with huge crowds visiting every day. However, waking up
to the ‘stars and stripes’ piped through the ships loudspeakers every
morning made a change to my normal alarm clock.
The first workshop of the year was held in February at the Royal
Institution of Naval Architects HQ in London. The theme for the day was “Cost Analysis and the Strategic
Defence and Security Review”. For the first time that I can remember the requests for attendance to the
workshop was oversubscribed and, unfortunately we had to turn away some people who wished to attend.
We would like to offer our apologies to those members that were unable to attend. We can only advise that
those wishing to attend future events register as soon as possible to avoid disappointment.
The 2015 SCAF Cost Estimating Challenge was held in April (a report on the event is given later in the
newsletter). This really is an excellent learning event for the young presenters and the mixed (experienced
and novice) audience alike. The audience feedback from the day was excellent and showed that this annual
event is a must attend workshop for the costing community. The profile and quality of the presentations
seem to rise every year and organisations are now eager to put forward teams to participate. Many of them
come away saying that they have learned more about the art of cost estimating and the professionalism in
the presentations.
I look forward to the workshop in June and to the Summer Reception and Awards Banquet in July and look
forward to seeing you all there.
Please forward articles, letters or any other ideas for inclusion in the newsletter to:
Arthur Griffiths
Editor, SCAF Newsletter
Email: [email protected]
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Spring Newsletter April 2015
Historical Trend Analysis: Aircraft Carriers – What Price QEC?
Brian Tanner, Independent Cost Analyst
With the Queen Elizabeth Carriers more than half way through their
construction programme and the press and NAO publications reporting
significant cost growth, I thought it of interest to see where they lay on a
historical trend line1
The first aircraft carrier built as such was HMS Argus, built by Beardmore,
Glasgow after purchase by the Admiralty in August 1916. She was to have been completed as the Liner
CONTE ROSSO for Lloyd Subuado of Italy but work had been suspended on outbreak of war in August 1914.
The conversion was completed on 16th September 1918 at a cost of £1.308M.
HMS Argus was followed by HMS Hermes, designed and constructed as an aircraft carrier from the outset.
Ordered from Armstrong's at Elswick in July 1917, work was suspended in September 1919 and in January
1920 the vessel was towed to HM Dockyard Devonport for completion. By the completion date in July 1923
it had been possible to take into account some of the lessons learnt during the conversion and
reconstruction of HMS FURIOUS. One naval forum
( http://warships1discussionboards.yuku.com/topic/14352) gives unattributed details of weight group
breakdown and cost, viz: 10,075 t light; 10,417 t standard; 11,531 t normal; 12,423 t full load. Cost £1.203M.
HMS Eagle was converted from the partially built Chilean battleship Almirante Cochrane, a Dreadnought
Battleship. All work on this ship ceased in 1914 and she lay on her slip until 1917 when her purchase by the
Admiralty was negotiated with the Chilean Government, the purchase price being £1,334,358. Janes Fighting
Ships 1939 states funds subsequently expended raised the total cost to £4,617,636.
There was also the conversion of the three battle cruisers Courageous, Glorious and Furious in the interwar
years. Referenced sources of cost on the internet show the total cost of each ship to be in excess of £4M, a
cost which when normalised exceeds that for subsequent vessels, no doubt due to the inclusion of costs for
the original armament and structure.
Then there was HMS Ark Royal the Royal Navy’s first full-sized aircraft carrier and the first ship on which the
hangars and flight deck were an integral part of the hull, instead of an add-on or part of the superstructure.
Given that carrier construction until Ark Royal was mainly conversion or prolonged construction, it was
decided to start the HTA (Historical Trend Analysis) from this carrier.
HMS Unicorn, an aircraft repair ship and light aircraft carrier, was ordered on 14 April 1939. Her construction
was delayed several times in favour of higher priority projects and she was not completed until 12 March
1943. In order to accelerate the ship's completion, the Admiralty decided in 1942 that she would not be
equipped with her full suite of maintenance and repair equipment. Excluding her armament, Unicorn cost
£2,531,000.
In the years leading up to the Second World War the MoD began building the four ships of the Illustrious
class of armoured fleet carrier. The design was developed into the two carriers of the Implacable class
1
Especially as one who was involved in the original estimate when part of the UK Ministry of Defence.
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Spring Newsletter April 2015
followed by the much larger Audacious class which became HMS Ark Royal and HMS Eagle, the last
conventional fleet aircraft carriers to serve in the Royal Navy.
The 1942 Design Light Fleet Carriers, 10 of which were built, were designed and constructed by civilian
shipyards to serve as an intermediate step between the expensive, full-size fleet aircraft carriers and the less
expensive but limited-capability escort carriers.
The 1942 design was modified to take more modern aircraft and these ships became the Majestic-class. Six
of the class were built but not completed until after the end of the war, most ended up being purchased by
other navies.
The Centaur class of aircraft carriers of the Royal Navy was the last of the light fleet carrier designs started
during the closing years of World War II, but construction was halted at the end of the war, four eventually
being completed in the 1950s.
The Invincible class of light aircraft carrier entered service in the 1980s operating the VSTOL Sea Harrier.
They lacked both the catapults and arrester gear needed in aircraft carriers to operate conventional jet
aircraft and were therefore less complex.
Having précised the history of aircraft carriers in the Royal Navy there arises the question of cost. Typically
any published or recorded cost can be presumed to be the shipbuilding cost – excluding armament/
electronics, but including the cost of main machinery even though that was at times the subject of a separate
contract.
Cost data can come from various sources. Earlier aircraft carriers have costs given in Janes Fighting Ships of
the period. Information on the carriers built during World War 2 is not immediately available.
Following the end of the Second World War the estimated cost at completion for all Royal Navy vessels was
reported in the Navy Estimates or predecessor publications. These have been compiled by Dstl Tim Jefferies
and relevant costs have been used in this HTA.
A trend analysis can be done in Then Years monies in which case the trend includes inflation and any
projection will be at the cost level of the date point used. For this HTA the intent was to forecast the cost of
the Queen Elizabeth Class at 2005 levels to compare with decisions at that time.
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Spring Newsletter April 2015
Applying a geometric regression to the Royal Navy data produces a specific cost of £226 K/MT. Applying this
to the public domain Full Load Displacement and an assumed Basic Weight: FLD ratio produces a unit
shipbuilding cost of £10.9B with a prediction interval of +33%, -25%.
But in effect useable data on carrier construction occurs at only two points in history so one is forcing a
geometric curve through just two points. Questionable.
Also, the STOVL carriers are simpler vessels, so perhaps the HTA is not appropriate. Instead, data on the
build costs for first off STOVL carriers has been sources. These comprise two Italian carriers, a Thai carrier
built in Spain and two US amphibious vessels with STOVL capability, i.e. LHD8 Makin Island and LHA6
America. Applying a geometric progression to these vessels produces a specific cost of £42K/MT with an 80%
prediction interval of +50%, -33%. Applying this to the public domain Full Load Displacement and an
assumed Basic Weight: FLD ratio produces a unit shipbuilding cost of £2.03B.
The historical data relates to shipbuilding cost. To this must be added a design cost, assumed to be a typical
value for large vessels of 20% to 25%, and an electronics and armaments cost assumed to be one eighth of
the shipbuilding cost based on public domain information on LHA 6 USS America. Together these produce a
total cost of £5.1B at 2005 ECs.
The two trend lines are shown in this graph and the results are summarised in the table below.
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Spring Newsletter April 2015
Results @2005 Ecs
Shipbuild per Ship: £B
UK Built
VSTOL Trend
10%
90%
Confidence
Median
Confidence
£8.00
£10.88
£14.79
£1.36
£2.03
£3.01
10%
90%
Median
Confidence
VSTOL All Elements: £B Confidence
Shipbuild 2 off
£2.73
£4.05
£6.02
Design @ 25%
£0.34
£0.51
£0.75
C&C @ 12.5%
£0.34
£0.51
£0.75
Total
£3.41
£5.07
£7.53
How does this compare with current estimates?
Taking the expenditure reported in the Major Projects Reports and normalising using the MoD Defence
Inflation Estimates for Ships and Boats gives an expenditure at 31 March 2014 (latest figures) of £3.155B at
2005 ECs.
Plotting the normalised expenditure and fitting S curves based on previous large ship expenditure profiles
produces the follow graph:
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Spring Newsletter April 2015
Any estimator has to be aware that extrapolation is dangerous, but the forecast from this exercise is £5.791B
at 2005 ECs. To produce a forecast cost at Outturn levels to accord with MPR data, estimated in year
expenditure has been inflated using the average trend of the Defence Inflation Estimates for Ships & Boats of
2.5% per annum; this produces an estimate of £7.362B, somewhat greater than the current MPR figure of
£6.102B.
The forecast of £5.8 Billion at 2005 ECs lies within the band forecast by the HTA.
Once again we were delighted to receive several nominations
from organisations wishing to participate at this year’s event.
The aim of this workshop was to provide an interactive training
session in cost estimating through the presentation of case
studies that had been conducted by professional teams from
academia, industry and consultants with the added benefit of
top-level critique by senior figures in the profession. This year
we had seven teams participating and had to turn down other
teams due to lack of space. The challenge this year was to conduct a Balance of Investment analysis to
determine the government’s best strategy to address the problem. It was to be assumed that Fredonia is a
dependant territory of SCAFland. Fredonia has no defence force or offensive capability. There is a military
scenario which could foresee Fredonia being attacked and overrun by a force against its will with the citizens
of Fredonia requesting help and assistance from SCAFland. This scenario requires a contingency plan for
SCAFland to recapture Fredonia and free its citizens.
The SCAF 2015 Cost
Estimating Challenge
April Workshop, Bristol
Members of the Teams from BAE Systems, BMT Group, Cost Assurance and Analysis Service (MoD), Thales,
Norwegian Defence Research Establishment (FFI), Atkins and QinetiQ
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Spring Newsletter April 2015
The first presentation was delivered by 2 people from BMT. BMT collected most of their data from Internet
sources, they demonstrated the use of Data Ready Levels, PESTLE and a balanced scorecard.
Next, a 6 person team from BAE Systems gave a good presentation from a junior team with an average of 7
months experience. The BAE Systems’ team discussed how they used modern communication methods to
overcome the geographical challenges posed by the team members being located in Bristol, Preston and
Glasgow.
A team of 3 presented from QinetiQ. They had the additional pressure of their Technical Manager, Brian
Spedding, being on the Senior Review Team. QinetiQ made a conscious decision to carry out this task using
analogous and parametric methods only, that is, time did not allow for them to do a bottom up estimate.
They did include a detailed risk register and even took the time to cost up mitigation actions for each risk.
The next presentation was given by 3 people from the Norwegian Defence Research Establishment (FFI). Each
member of this team should take credit from the fact they were presenting to an English speaking audience
and their presentation was word perfect in English. After this team had derived their bottom up cost, they
made a comparison between a similar scale conflicts to ensure that their estimate was reasonable. FFI also
passed an FFI journal on “Defence Investment Cost Escalation – a refinement of concepts and revised
estimates” to each of the teams presenting; this journal is available at www.ffi.no.
The last presentation of the morning session was given by 2 people from Thales, both of whom had excellent
presentation skills; it was very polished and there was not a single Mmmm or Ummm. The Thales team
considered four scenarios and the operational challenges/effectiveness of each scenario. They also considered
where the strength of their force would be in comparison to the perceived enemy. Therefore, the selection of
the force size was not just based on the cost, it was also based on how effective the solution was.
After an excellent morning session, the two afternoon presentations did not disappoint. The afternoon started
with a presentation from 4 graduates from Atkins. The team had no previous costing experience and had
divided themselves into Cost and Operational Analysis functions. When presenting their findings they
removed common costs to highlight the differences in the options they had costed. They also commented on
the fact that they had communication problems and they all sat in the same office space, therefore they were
impressed that the BAE Systems’ team had managed to overcome their geographical issues.
The final presentation of the day was given by a team of 5 from the Cost Assurance and Analytical Service
(CAAS) in DE&S. The CAAS team had an average of 6 months experience. They demonstrated the use of the
generic CAAS process of Initiate, Plan, Execute and Close (IPEC) that is applied to all CAAS tasks. As with
previous years, the CAAS presentation was light hearted and was a good way to end the presentations for the
day.
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Spring Newsletter April 2015
During a well-deserved tea break, the Senior
Review Team Brian Tanner, Alan Jones and Brian
Spedding (pictured from L-R) assessed all the
presentations. The Senior Review Team’s
findings were then fed back to all the attendees.
Their conclusions were that the quality of
presentations and adopted approaches were
probably the highest standard given at a SCAF
Challenge workshop (this is the 4th) and that all
the teams had highlighted the lessons learned
and demonstrated what was required to
establish sound cost estimating judgement.
It was good to see similar but different
approaches to the problem and this, in itself, was educational for all the 60+ attendees. For the Society it
showed that the workshop had fully achieved its aims and objectives by providing a training session in cost
estimating conducted by graduate professional estimating teams and retained the enthusiasm with a
programme that was instructive, entertaining and enjoyed by experienced costing practitioners, finance
mangers and project staff in addition to all the presenters. Our thanks to all the teams and their organisations
for their support to this excellent lessons learned workshop.
The comments and reviews say it all – Make sure you attend in 2016
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Spring Newsletter April 2015
SCAF Annual Conference
“Living with Austerity, Enabling Growth”
Tuesday 15th September 2015
The QEII Conference Centre, Westminster, London
CALL FOR PAPERS
The fiscal situation remains very challenging. With possibly further significant spending restraint planned up to
2018/19, the pressure is on - and will continue into the next Parliament. Uncertainty and austerity will continue
to be the watchwords for public bodies during the next few year. Affordable government is the order of the
day, while fostering the conditions for growth - with an emphasis on 'good growth' - particularly good jobs.
Innovators today recognise that the business case is the basic requirement to secure funding and key financial
metrics are underpinned by a real and detailed understanding of cost. The very moment that funding is needed
is often the time when the creator’s ‘baby’ needs the greatest attention – a tension that demands a rapid
understanding of product and programme cost in particular. In this age of austerity, more than ever before, it is
imperative that we aim to get more for less; now it’s important that we pause and help decision makers to
achieve their project goals whilst staying within their budget. Our confirmed speakers are:

Ron Finlayson, Strategy Director Defence, QinetiQ

Susanna Mason, Director General Exports and Commercial Strategy, DE&S

Michael Christie, Director, Strategy & Market Development and Chief Technologist, BAE Systems

Dr Tim Sheldon, Head of Cost Assurance & Analysis Service, DE&S

Brian Glauser, President, International Cost Estimating and Analysis Association

Dr Linda Newnes, Head of Costing Research, University of Bath
Further papers are sought on related topics including:

Investment Appraisal

Costing Methodologies/Applications

Affordability Assessment

Risk Analysis

Benefit Analysis

Decision Making
Deadline
Please let us know if you plan on submitting a paper and what your planned topic will be no later than 30th
June 2015. Forward details to: Neil Morrill at [email protected] or call 0306 770 3450.
www.scaf.org.uk
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Spring Newsletter April 2015
Cost Analysis and the
Strategic Defence and
Security Review
February Workshop,
London
The Comprehensive Spending Review of 2010 was described as the
biggest budget cuts since World War 2. The review proposed an £81
Billion cut in public spending in the remaining 4 years of the parliament
with an average departmental cut of 19%. The MoD faced expenditure
cuts of around 8%.
The next SDSR will be held in 2015. With unfinished business from its
2010 predecessor the 2015 review is likely to be contentious. As we
prepare to support activities that will form part of the review we can only
surmise on the potential changes that it will bring. The SCAF Workshop
had been set to air concerns and observations that both Practitioners and Academics are currently grappling
with.
The first speaker of the day was Andrew Barnard, an economic
advisor in the Defence Economics team at the Ministry of
Defence a role he has held since 2012. Prior to joining the MoD
Andrew worked for the national accounts team at the Office for
National Statistics and in the Olympics team at the London
Development Agency. There is no doubt that all this experience
was brought to bear as he spoke on “An Economic Case for
Defence”. The presentation showed how spending mitigated
security risks and how the investment created a very clear
benefit to the UK by securing overseas areas of importance and
supported civil authorities. The results of Andrew’s study
showed that there were very positive spill over effects from MOD activities including how MoD investments
benefitted UK industry; how defence trained individuals had a positive effect on the economy; how military
investment raised UK innovation and R&D and how MoD house building supported economic growth. A good
case for sustaining the defence budget.
Arthur Griffiths, Associate Consultant with Decision Analysis
Services Ltd and Past Chair of SCAF gave a presentation entitled
“Economics, Cash Profiling and Financial Balance – are we
expecting too much for Defence in 2015”. Arthur’s presentation
was based around notable facts on the UK economy which is
expected to grow faster than any G7 country this year. However,
the significance of the UK debt coupled with falling revenues
suppresses the opportunity to flow down the gains from
economic growth to public sector investment. We are told that
further cuts in expenditure is needed to reduce the budget deficit
and provide better balance in the budget. The questions were
therefore (a) How much money do we have? And, (b) How is it
best spent? The presentation discussed the level of debt and its effects on the budget to establish an
understanding of the current position and its likely effects on Defence spending. Arthur’s concluding charts
provided the basic questions for the plenary session.
George Crockford and Mathew Hemsley, both Auditors with the
National Audit Office provided an excellent insight with a
presentation entitled “In Defence of Forecasting and Forecasting
for Defence”. This double header started with a statement from
Sir Amyas Morse, Comptroller and Auditor General “Departments
generally treat forecasting of future spending as little more than a
technical activity, of limited relevance to financial management.
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Spring Newsletter April 2015
In fact, high quality forecasting is an indispensable element of project planning and implementation. We have
seen many examples over recent years of government projects where weaknesses in forecasting have led to
poor value for money. A first step towards improving the quality of forecasting would be increased
transparency and scrutiny of forecasting and more concerted action
at the centre of government.”
George’s presentation focussed on the use of forecasting in
government and recent financial management reviews and actions
whilst Matt concentrated on the Defence Budget and the 10 year
Equipment Plan. In particular Matt provided - A review of the
nature of the Equipment Plan; the Equipment Plan in the context of
the MoD budget; forecasting the Equipment Plan costs and, a
summary on the findings from the 2014 review.
Bob Mills, Estimating Manager, Jaguar Land Rover had the
difficult task of being first on after lunch and gave an excellent
talk on “Parametric Thinking”. He explained that Automotive
New Model Programmes are typically only in their development
phase (pre volume production) for between 1½ to 6 yrs. In
common across Industry sectors it was important to recognise if
a programme will make a profit and as early as possible in the
development process. If it is not profitable on paper, is there
anything we could do to steer the programme towards making a
profit? When to stop ‘CPR’ and let the programme die!
Parametric Cost Estimating has rarely, if at all, been applied
within the Automotive sector. In his presentation Bob explored the reasons why it might be appropriate to
adopt its application and hinted at the results that Jaguar Land Rover had achieved during a Proof of Concept
application.
Charlotte Watson graduated from Manchester University and
completed her Master’s degree in Mathematics at Warwick
University in 2010. Since joining Arke Ltd in 2013 she has worked
on a number of fascinating projects across all three military
domains specialising in mathematical modelling and statistical
analysis. Her presentation entitled “Quantifying the Costable and
Non-Costable Impacts of Programme Change” covered the
thinking on cost benefit analysis and where benefits mapping fitted
in to the decision making process. During her talk Charlotte also
showed how to map and quantify the non-costable benefits in
order to be used as an options comparator
Our final speaker before the Plenary Session was Andy Nicholls,
Principal Analyst, PRICE Systems. Andy’s presentation was on “Force
Structure Modelling Approaches” and looked at one major aspect of
Force Structure – how to ensure all individual programmes and projects
could be included into an integrated cost model. The paper was based
on public domain information available from a particular country
covering most of the defence programmes just entering or about to
enter service. The information presented represented a ‘plan’ that was
subject to change with time for various reasons.
Our thanks to all the speakers for an excellent workshop. Copies of all the presentations are available to
download from our website www.scaf.org.uk.
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Spring Newsletter April 2015
Forecasting the Obscure in Austere Times
Dale Shermon, QinetiQ Fellow and Head of Profession Cost Engineering
Austerity is a depressing word for a lot of people whose ‘glass is halve full’. For cost engineers austerity is a
word of joy. As an engineer and an optimist we have never been so busy. For the first twenty years of my
career it was a fight to persuade project managers and executives that they needed to understand the cost of
their project; now everyone is chasing me to get an understanding of the cost for their project. Austerity - the
best thing that ever happened to cost engineering.
The only downside is that I'm being asked to estimate the cost of more diverse products, equipment and
services. So how do you approach the cost estimation of a project that you have not seen before? It can be a
daunting prospect for a novice cost engineer to look into the eyes of a project manager and shrug and say I
can't do it. In these times of austerity anyone who can populate a spreadsheet thinks that they can pass
themselves off as a cost engineer when, if you scratch under the surface, you will realise that there is more to
cost engineering than means the eye. So how would I tackle a project that I had never seen before? The
QinetiQ philosophy of knowledge based estimating (KBE) has always been a good guide. KBE utilises the
building blocks of a good estimate in data, tools, people and process.
The first order of business is to gather some historical data for previous kindred projects. This financial and
technical data needs to be normalised and cost estimating relationships (CERs) established. The next order of
the day is to gather information regarding the project to be estimated. I recall a bid manager in Australia who
told me that I would not be able to forecast the cost of his project. With joy I looked forward to seeing this
project which obviously has no electronic circuits, aluminium fabrication, welded steel, composite, software,
and so therefore. Reluctantly he admitted that his project had all of these technologies, I acknowledged that I
might not have seen this precise configuration, but if it had these technologies I was confident that I would be
able to estimate it.
It is essential to have good statistical tools at your disposal to enable you to quickly and with confidence
understand the historical data. These give you the ability to generate individual CERs which can be combined
into forecasting systems. Typically as cost engineers we are required to predict the cost of projects that are
beyond our historical data. It is essential that these projects recognised the increased uncertainty that arises
in these circumstances. To this end we require people who are skilled in cost engineering, trained and
certified. Staff who are thought leaders and prepared to explore the unknown. Cost engineers need to have a
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Spring Newsletter April 2015
good broad system engineering appreciation, understanding of accounting practices, business skills, project
management, business development, presentation, interpersonal skills, numerous, risk, statistics and so
therefore. Just because you can find the =SUM function in Microsoft Excel it will not make you a cost
engineer.
Finally, for any cost estimate, and a new project is no exception, you need to have a process. The Basis of
estimate (BOE) is a critical part of the process. If you are unable to communicate your cost or schedule
estimate than you have wasted your time. You need to be able to articulate your estimate and ensure other
people are able to follow the process. Ultimately, a scrutineer or third party should be able to take the same
data, tools and if they have the same skills, utilise the same process to come to the same conclusion or
estimate as you; regardless of the level of knowledge of the project.
2015 SCAF Committee Elections
It is time to start thinking about who you would like to run our Society. The Elections Committee is responsible
for soliciting a list of qualified candidates for a membership vote. The election for 2015 will be for four (4)
members of the management committee who will serve a two-year term of office.
The requirements for being on the committee include:

Being a member in good standing (membership dues must be current at all times)

Attending the committee meetings

Supporting the Society by performing special activities as directed by the committee
In addition to meeting these requirement, qualified candidates must complete a completed submission form
suitably supported by a proposer to the returns officer at the address shown on the form. The nominations
form will be mailed to all members and will also be available to download from the SCAF website.
The officers standing down or seeking re-election are:

Neil Morrill (Secretary)

Andy Nicholls

Karen Sparks

Paul Moseley
The Society would like to take this opportunity to thank them for their support and look forward to them
continuing to participate in all future SCAF activities.
The elections committee has established the following schedule for conducting the 2015 elections:
Initial Nomination Period
Opens 31st May, Closes 30th June
Review Nominations
1st July
Ballot Distribution
22nd July
Voting Period
Opens 25th July, Closes 30th August
Committee Announcement
15th September
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Spring Newsletter April 2015
As part of our Memorandum of Understanding with the Association of Cost Engineers we are pleased to
publish the following notices. Please note that these are not SCAF organised events and any arrangements
should be done directly with the Association of Cost Engineers whose details are included in the notices.
www.scaf.org.uk
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Spring Newsletter April 2015
www.scaf.org.uk
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Spring Newsletter April 2015
TERRY BISHOP AWARD 2015
INSTRUCTIONS TO CANDIDATES
Purpose of award
The purpose of this award is to encourage Project Controllers, Cost and Planning Engineers and Risk
Managers to think laterally, and to consider solutions to project control issues which may be unconventional
but are innovative, effective, efficient, user friendly and deliver an enhanced result to the customer.
Specification for Papers:
The judging process will be based on the following criteria:

One submission per contestant.

Level of Innovation

Relevance to differing industry sectors

Knowledge improvement

Focus on excellence

Contribution to the practice of Project Control.

Effectiveness of the submitted topic, explained either by practical application in the workplace, or by
demonstrable research, both supported by references.

Consideration of “Constructing Excellence” and of “Building Information Modelling (BIM)” should also
be included (if appropriate)

The practical aspects of the project control innovation will be assessed favourably by the judges, on the
grounds that “practicality” is an essential for the application of effective project controls.

Compliance with these Instructions to Candidates
Finally, submissions should include the author’s personal thoughts on the processes and topics covered,
given that one of the key requirements of competent Project Controllers centres around good inter-personal
skills, and establishing and maintaining good relationships around them.
Who is eligible?
Submissions will be welcomed from individuals or teams from Companies, Professional Bodies,
Colleges/Universities and Manufacturing or Project-based companies or organisations.
This includes all practising Project Controllers, Cost Engineers/Controllers, Planning Engineers, Cost
Estimators and Risk Managers, at any level, in any industry, whether it be process, manufacturing or project
based.
One of the objectives of the competition is to provide Project Control Specialists with the opportunity to
share their ideas and experiences with Industry in general while, at the same time raising their own profile
and that of their companies.
Submissions from teams, as well as from individuals, will be welcomed.
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Spring Newsletter April 2015
How to apply – Submission of Abstract
An abstract/synposis paper must be prepared and submitted by 12 June 2015 to [email protected] and
must include the following information:

Name, position and company of the Candidate

Contact details (postal and e-mail address, business and mobile telephone numbers)

Title of the submission and an explanation of why it was developed

Brief description of how the submission meets the above “Specification for Papers”

Conclusion – explaining why it should be considered for The Terry Bishop Award
As a guideline for volume, the Abstract should contain no more than 600 words.
How to apply – Submission of Full Paper
When the Judges have studied the submitted Abstracts, they will communicate with all applicants by 03 July
2015 to indicate whether the submission should be developed into the Full Paper or has not been accepted.
Accepted Papers will then be developed in full detail and will be supported by whatever charts/diagrams etc
which are felt necessary for full clarity.
As a guideline for volume, the Full Paper should contain no more than 6000 words.
Full papers must be submitted by 07 August 2015 to [email protected] for final assessment.
The Selection Process
Each submission will be assessed by the Judging Panel, one of whom will be its Chairman, and all of whom
are professionally experienced in project controls. Each submission will be evaluated and quantified against
the criteria described above and, in event of a tie, the Chairman’s decision will be final.
Award Presentation
The winner of The Terry Bishop Award will presented with a prestigious plaque bearing reference to the
Terry Bishop Award, the winner’s name, and the name of the employing company.
The Award will be presented at the ACostE Conference Dinner on 21 September 2015.
It is the intention that the Award proceedings will be recorded and an edited version of the winning paper
will be posted on the Project Control TPN and ACostE Websites, and published in the ACostE Journal “Project
Control PROFESSIONAL”.
The winner of the Award will be invited to be present, as an honoured guest, at the next equivalent event.
Further details can be obtained from [email protected]
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Spring Newsletter April 2015
SCAF Events in 2015
2 June
SCAF Workshop Theme: Data Maturity and its Applications, Ribby Hall Village, Preston.
Data quality is an essential characteristic that determines the reliability of data for making
decisions. High-quality data is Complete, Accurate, Available and Timely. Business leaders are keen
to analyze it to obtain actionable insights and improve the business outcomes. Unfortunately, the
proliferation of data sources and exponential growth in data volumes can make it difficult to
maintain high-quality data. How best then to use whatever data we can gather in order to
modelling objective cost and schedule forecasts. Please contact the Secretary if you are interested
in attending this event.
7 July
SCAF Summer Reception and Awards Banquet, The Bailbrook House Hotel, Bath.
This evening event will be held at the prestigious Bailbrook House Hotel commencing at 7.00pm.
Attendance (including dinner) at the event is FREE (subject to availability) to SCAF members, their
spouses and invited guests. We would encourage everyone who wishes to attend to register with
the Secretary as soon as possible to avoid disappointment. For those wishing to stay overnight,
discounted rates are available and bookings should be made directly with the hotel. . Please
contact the Secretary if you are interested in attending this event.
15 Sept
SCAF 2015 Annual Conference and AGM, The QEII Conference Centre, London.
The fiscal situation remains very challenging whichever political party wins the election.
Organisations today recognise that the business case is the basic requirement to secure funding
and key financial metrics are underpinned by a real and detailed understanding of cost. The very
moment that funding is needed is often the time when the creator’s ‘baby’ needs the greatest
attention – a tension that demands a rapid understanding of product and programme cost in
particular. In this age of austerity, more than ever before, it is imperative that we aim to get more
for less; it is important that we help decision makers to achieve their project goals whilst staying
within their budget. Please contact the Secretary if you are interested in presenting a paper at
this event.
17 Nov
SCAF Workshop Theme: Investment Appraisal: What’s in it? The BAWA Centre, Filton, Bristol
The UK Ministry of Defence is proposing changes to the financial instructions relating to the
development and application of Investment Appraisals for project approval. This workshop will
discuss the effects of the changes and their implication for Industry in delivering whole life costs
and value for money options. Please contact the Secretary if you are interested in presenting a
paper at this event.
For further details on any of the above events please contact the SCAF Secretary, Neil Morrill by
telephone on 02392 537 271 or by email: [email protected]
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Spring Newsletter April 2015
Other Related
Events
9-12 Jun 2015
Networking
for the cost
estimating
and analysis
community
21-24 Jul 2015
SCAF is not responsible for the content of any
external websites published in this Newsletter
International Cost Estimating and Analysis Association (ICEAA) Professional Development
and Training Workshop, San Diego.
This Annual Conference has well-known Keynote Speakers and Innovative Panel Sessions,
Integrated Training Tracks, Informative Workshops and Exciting Vendor Exhibits. Separate
certification exams are offered at the conference for a separate fee. Further details and
registration can be obtained from www.iceaaonline.org
32nd International Symposium on Military Operational Research (32 ISMOR), Royal
Holloway, University of London, Egham, Surrey.
Attendance at ISMOR offers a unique opportunity to spend four days exploring the
application of analysis to practical issues in defence and security with a wide range of
colleagues from across the world. As well as inspiring experienced practitioners with
exposure to new approaches, innovative solutions and providing informal testing of ideas, it
offers excellent development to early career analysts and an opportunity for the users of
analysis to understand its potential. Further details and registration can be obtained from
www.ismor.com
21-22 Sep 2015
The Association of Cost Engineers Annual Conference 2015, Cranfield University,
Bedfordshire
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Spring Newsletter April 2015
SCAF Management Committee Meetings 2014/15
Date
Venue
Focus
7th October 2014
QinetiQ, Bristol
2015 events programme
11th November 2014
BMT, Fareham
2015 workshops content & challenge
9th December 2014
QinetiQ, Bristol
6th January 2015
BMT, Fareham
Finalise 2015 events programme and interim 2016
programme
Finalise challenge and financial budget for 2016
10th March 2015
QinetiQ, Bristol
Discuss awards nominations
19th May 2015
BMT, Fareham
14th July 2015
QinetiQ, Bristol
Annual Conference, final details for awards dinner and
committee nominations
Annual Conference final details
6th October 2015
QinetiQ, Bristol
2016 events programme and November workshop
10th November 2015
BMT, Fareham
Ideas for SCAF Challenge and February workshop
8th December 2015
QinetiQ, Bristol
Finalise 2016 events programme and interim 2017
programme
The committee would welcome any suggestions on particular topics that can be developed for debating at future
workshops or for round table/panel discussion. We would also welcome any comments on changes or otherwise
you might like to see to the workshop structure and content.
Please forward your comments to [email protected] where they can be put on the agenda for committee
discussion and action.
Please also remember that the committee works for the members and will do their utmost to address any issues
raised to the benefit of the Society.
SCAF Corporate Membership
Are you a company that sends 5 or more staff to any of our workshops? There are discounts available for block
bookings with further flexibility offered for Corporate Membership. Further details can be obtained from the SCAF
Treasurer, Dave Hedley email: [email protected]
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Spring Newsletter April 2015
For over 20 years the Society has sought to illuminate key issues in the
analysis and forecasting of project costs—and to promote best practice
within the cost forecasting community.
The Society provides a single point of contact for advice to those wishing
to address key issues in the analysis and forecasting of costs and
timescales of complex programmes.
Workshops and seminars are held at regular intervals throughout the
year. A newsletter is published electronically 3 times a year.
Collaborative links with other societies has always been maintained and
a library of relevant papers are available. A single annual payment at
the Annual Conference entitles members to attend all the years’
programme of SCAF events at no further cost. The Summer Reception is
also provided free to SCAF members and their guests.
SCAF is committed to providing Continuing Professional Development
(CPD) through the provision of its skills workshops and its support to
Professional Development courses.
The Society is self-funded and a Not-for-Profit organisation and
continues to provide members with exceptional value for money.
SCAF 2014/15 Committee Members and Contact Details
Chairman:
Dale Shermon
[email protected]
T: +44 (0) 1179 528 455
M: +44 (0) 7785 522 847
Treasurer:
Dave Hedley
BMT Reliability Consultants Ltd
[email protected]
T: +44 (0) 1489 553 163
Secretary:
Neil Morrill
Dstl
[email protected]
T: +44 (0) 2392 537 271
Committee:
Paul Moseley
MoD, CAAS
[email protected]
T: +44 (0) 306 797 1023
Karen Sparks
Atkins
[email protected]
M: +44 (0) 7881 503 389
Dr Paul Wood
BMT HiQ-Sigma
[email protected]
T: +44 (0) 1225 820 980
www.scaf.org.uk
Newsletter: Arthur Griffiths
[email protected]
M: +44 (0) 7792 911 279
Join us at our
Linkedin Group
Society for Cost
Analysis and
Forecasting - SCAF
Dr Paul Baguley
Cranfield University
[email protected]
T: +44 (0) 1234 750 111 x 5658
Andy Nicholls
PRICE Systems
[email protected]
M: +44 (0) 7500 866 822
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