Cost Estimating and Systems Engineering: An Integrated and Concurrent Approach
Lisi, M
Telespazio

Cost is a very fundamental variable to be considered while defining and developing new systems. By all means it is (at least, it should be) considered as an independent variable, one driving the main design and development decisions rather than deriving from them.

The integration of cost estimating into the systems engineering process has become increasingly important given the increasing complexity of systems and the diffusion of Systems of Systems (SoS).

A System of Systems connects multiple systems to solve a large scale problem; a system of systems is therefore network centric by its nature. A "system of systems" can also be defined as the aggregation of normally independent systems to achieve an emergent behavior that is not evident in the individual systems (emergent phenomena are typical of complex systems). The "official" definition provided by the INCOSE (International Council on Systems Engineering) Handbook is: "an interoperating collection of component systems that produce results unachievable by the individual systems alone".

The need for Systems of systems derives from the paradigm shift taking place in the world, that is the advent of a service-based economy.

Service systems, that is, systems meant to deliver value-added services (capability-based rather than platform-based), are network centric and computational systems. Through service systems, the network centric paradigm, originally conceived in a warfare environment, is extending itself to Homeland Security and to other critical ICT infrastructures (Network Centric "Welfare" systems, such as Air Traffic Management, Emergency and Disaster Management, Electrical Distribution Management, etc.).

Cost estimating net-centric systems and systems of systems is a complex and challenging task. It was previously mentioned the presence of "emerging" behaviors in SoS's, i.e. properties neither evident nor detectable in the individual component systems. Analogously, unexpected factors emerge in cost estimating large and complex systems.

Moreover, customer's attention is more than often focused on Total Cost of Ownership (TCO), that can be defined, in general, as the purchase price of an asset plus the additional costs of operation.

From the customer viewpoint, TCO describes not only the costs of purchasing a product (device, equipment, system) or service, but also all the hidden costs associated with using it. In other words, TCO includes planning, design, installation, configuration, maintenance, and support from both the administrative and technical perspectives.

When the product (system or system of systems, in our case) is not owned by the customer, but rather leased in the form of an "all-inclusive" service, the terms "total cost to use" or "total cost to lease" should rather be used, as more appropriate. It is however evident that the economic cost of service provision is strictly linked to the evaluation of the Total Cost of Ownership.

The paper will describe how Cost Estimating should be concurrently integrated into the systems engineering process to reduce the danger of cost and schedule overruns, over the total systems life cycle. A concurrent approach will be shown essential, as life-cycle cost trade-offs early in the design process are critical in optimizing the system.