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THE BUSINESS CASE FOR

SYSTEMS ENGINEERING
10 March 2018

Robert J Halligan, FIE Aust CPEng

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P1314-005216-3 © Copyright Project Performance (Australia) Pty Ltd 1998-2018


Robert J Halligan, FIE Aust CPEng

Managing Director Past Member of the INCOSE


Project Performance International Board of Directors

Content Contributor Past President


to EIA/IS-632, EIA 632, IEEE 1220, Systems Engineering Society of
ISO/IEC 15288 SE standards Australia

Past INCOSE Head Of Delegation Consultant/Trainer


to ISO/IEC SC7 on Software and to BAE Systems, Mitsubishi,
Systems Engineering Airbus, Thales, Raytheon, General
Electric, Boeing, Lockheed,
General Dynamics, OHB, Nokia,
AREVA, BHP Billiton, Rio Tinto,
Embraer, Halliburton and many
rhalligan@ppi-int.com other leading enterprises on six
continents

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SEI/AESS/NDIA 2012 STUDY RESULTS

Relationship to Performance
Driver (Gamma)
All Projects Lower challenge Higher challenge
SEC-Total – total deployed SE +0.49 +0.34 +0.62 Gamma Relationship
SEC-PP – project planning +0.46 +0.16 +0.65 -0.2 <| Gamma | ≤ 0 Weak negative

SEC-REQ – reqts. developt. & mgmt. +0.44 +0.36 +0.50 0 ≤ | Gamma | < 0.2 Weak positive

SEC-VER – verification +0.43 +0.27 +0.60 0.2 ≤ | Gamma | < 0.3 Moderate

SEC-ARCH – product architecture +0.41 +0.31 +0.49 0.3 ≤ | Gamma | < 0.4 Strong

SEC-CM – configuration management +0.38 +0.22 +0.53 0.4 ≤ | Gamma | Very strong

SEC-TRD – trade studies +0.38 +0.29 +0.43


SEC-PMC – project monitor & control +0.38 +0.27 +0.53
http://resources.sei.cmu.ed
SEC-VAL – validation +0.33 +0.23 +0.48
u/asset_files/specialreport/
SEC-PI – product integration +0.33 +0.23 +0.42 2012_003_001_34067.pdf

SEC-RSKM – risk management +0.21 +0.18 +0.24


SEC-IPT – integrated product teams +0.18 -0.12 +0.40

Source: “The Business Case for Systems Engineering Study: Results of the Systems
Engineering Effectiveness Survey”, CMU/SEI-2012-SR-009, November 2012

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OUR JOURNEY:

• What are our challenges?


• What is systems engineering?
• Why systems engineering?
• Studies on the value of systems engineering
• ROI for one facet: Requirements Analysis

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KICK-OFF EXERCISE:

In groups of 3-4 people, consider the question


“what are the greatest challenges that we (you)
face in your engineering”? List as many
challenges as you can, in the time designated.

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WHERE WE HAVE COME FROM
– OOPS GOT THAT WRONG!

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TODAY, AND NOT JUST IN KABUL!

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THE PROBLEM IN GENERAL:

Standish Group study of 8380 IT-based projects


See also Morris and Hough, “The Anatomy of Major Projects”
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THE PROBLEM – COST:

% of
Projects For “challenged”
% of and cancelled
Projects For “challenged”
projects:
and cancelled
projects:

Average cost
overrun: 89%
Average cost
overrun: 89%

% of Cost Overrun

Standish Group study of 8380 IT-based projects


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THE PROBLEM – SCHEDULE:

% of
Projects For “challenged”
% of and cancelled projects:
Project
s

Average schedule
overrun: 122%

% Schedule Overrun

Standish Group study of 8380 IT-based projects

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THE PROBLEM – QUALITY:

% of
% of
Projects For “challenged”
Project For “challenged”
s projects:
projects:

Average missing
Average missing
features: 39%
features: 39%

% of Missing Features

Standish Group study of 8380 IT-based projects


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SYSTEMS THINKING – A FOUNDATION
System Views


Outward and Upward Looking View
(part of one or more bigger systems)

leads to

Object View
(object with required and desired Requirements
characteristics) +
Goals

leads to

Inward Looking View


(seeing the system destined to become a set
of interacting objects, the properties of the
whole coming from the objects and their
interactions)
PPI-005918-4

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WHAT IS SYSTEMS ENGINEERING?

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INTEGRATE VERIFICATION & VALIDATION
Needs
Information

PROJECT PERFORMANCE
INTERNATIONAL
SRA,SRR,ADR,DDR
www.ppi-int.com

S S
PCA
SRR
SRA ADR ADR
DDR DDR

SE
(e.g., Aircraft, time
SE
time
Air Traffic Control trend trend PCA
System)

SE
(e.g., Propulsion HWITLS
SE
System, Airframe) PITLS
SWITLS PCA OT&E
Legend :

ADR
A Build, increment, etc.
Architectural Design Review
SE
(e.g., Engine, e.g. test SE
DDR Detailed Design Review Fuel Pump) RSA
HWITLS Hardware in the Loop Simulation
time
OT&E Operational Test & Evaluation
PCA
PITLS
Physical Configuration Audit
People in the Loop Simulation DESIGN BUILD
RSA (FCA) Requirements Satisfaction Audit
Verification:
S Top-Level System
Is the work product correct-meets requirements?
SE System Element
SRA System Requirements Analysis Validation:
SRR System Requirements Review
Does the work product satisfy the need for the work product?
SWITLS Software in the Loop Simulation ™
WEDGE MODEL
PPI-006003-9
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THE ESSENCE OF SE:

• ensure adequate problem definition


• define possible solution alternatives
• qualify solution alternatives for feasibility & effectiveness
• develop qualified alternatives
• use logical design as an aid in developing physical
design (model-based design)
• design through levels of abstraction – architecture and
detail
• maintain a clear distinction between problem and solution

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AND MORE …

• conduct trade-off studies and optimization to maximize


overall effectiveness
• specify solution elements to objective adequacy
• integrate engineering specialties with technology expertise
• verify work products (correct – the product right)
• validate work products (needed – the right product)
• employ configuration management
• do only work that adds value
• manage the engineering – plan, organize, inspire, assess,
control.

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WHEN IS SYSTEMS ENGINEERING
APPLIED?
• Solution development phase

• New Systems/Products

• Families of Products

• Solution build/production phase

• To correct design deficiencies

• Sustainment/operations and support phase

• Modifications to track changing need

• Incremental/competitive improvements for business


reasons

• Response to obsolescence

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WHAT IS SYSTEMS ENGINEERING
APPLIED TO?

• The enterprise

• Capability/business/enterprise systems

• End-use products

• Production systems

• Maintenance systems

• Training systems

• Project systems

• Engineering systems

• Anything else for which a solution does not already exist, and is sought!

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IN WHAT BUSINESS MODELS?
+
Benefit to Company - e.g. ∆ NPV (Net Present Value)

1:1 Customer/Contractor
Business Model

origin on x axis represents a


0 threshold of acceptability.

0 Benefit to Customer Optimum Optimum 1000


(external or internal) solution for the solution for
company the company
Internet Scam
Company
Internal Project
Business
Model

Product-Oriented
Free Market Place
Business Model

- Trade Off: Interests of Secondary Stakeholder (Customer) versus Primary Stakeholder (company)
PPI-005332-6
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INDICATORS OF EFFECTIVE SE
– PRODUCT-ORIENTED ENTERPRISE:

• On, under, or close to development budget

• On, ahead of, or close to development schedule

• High Return on Sales

• Market leadership

• Low warranty costs

• Repeat business is the norm

• High staff satisfaction and retention

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INDICATORS OF EFFECTIVE SE
– CONTRACT-ORIENTED ENTERPRISE:

• On, under, or close to development budget

• On, ahead of, or close to development schedule

• High contract gross margin

• High customer satisfaction

• Low warranty costs

• Repeat business is the norm

• High staff satisfaction and retention

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INDICATORS OF EFFECTIVE SE
– INTERNAL PROJECTS:

• On, under, or close to development budget

• On, ahead of, or close to development schedule

• High internal customer satisfaction

• No desire to outsource

• High staff satisfaction and retention

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INDICATORS OF EFFECTIVE
SYSTEMS ENGINEERING
MANAGEMENT:

• Effective systems engineering

• Harnessing of creativity

• A learning environment

• Growing intellectual capital within the enterprise

• High staff satisfaction and retention

• Shared vision of the outcome and a related focus on quality, cost, time

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INDICATORS OF NO SE OR
INEFFECTIVE SE:

• Milestones missed

• Significant dispute with stakeholders over requirements

• Many problems and delays occuring during system integration

• Significant dispute with customers over testing

• Significant problems occuring in released or fielded systems/products

• Engineering effort tends to be back-end loaded during development

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WHERE DOES THE MONEY GO?

Cost component Ideal % Actual %


What proportion of development cost is spent There is no
?
due to genuine system requirements changes? ideal.
What proportion of development cost is spent
0% ?
due to defective system requirements?
What proportion of development cost is spent
due to system design errors undetected in design 0% ?
reviews?
What proportion of development cost is spent
due to system design errors undetected in 0% ?
system testing?
What proportion of cost in a system integration
Close
phase is spent on system integration as opposed ?
to100%
to rework?

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McKINSEY STUDY (1)

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McKINSEY STUDY (2)
Quality Benefits
Equivalent to CMMI
SMI Design Quality Process Quality Service
Maturity Level Market Share % Scrap% Rework% Quality

5 C S
>35 <0.8 <0.5
OPTIMISING U E
S R
4 T V
MEASURED O I
>25 <2.0 <2.0
3 M C
DEFINED E E
R

3 C
DEFINED >20 <4.0 <3.0 O
2 E R
MANAGED R R
R E
1 O C
PERFORMED <20 >4.0 >3.0 R T
0 I
INITIAL O
N

SOURCE: Excellence in Quality Management, McKinsey & Company, Inc.

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OTHER OLD CLAIMS
1. Improved Quality of Designs
• Resulted in reduced Change Orders (> 50%)
2. Product Development Cycle
• Reduced as much as 40-60% by concurrent rather than sequential
design of products and processes

3. Manufacturing Costs
• Reduced by as much as 30-40% by having integrated product teams
integrate product and process designs

4. Scrap & Rework


• Reduced by as much as 75% through product and process design
optimization

Data based on a study of 14 companies that had applied concurrent


engineering - Institute for Defense Analysis (IDA), 'The Role of Concurrent
Engineering in Weapons System Acquisition’, December 1988
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NASA AND THE VALUE OF SE

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INCOSE STUDY - COST

SE Effort = SE Quality * (SE Cost/Actual Cost)

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INCOSE STUDY - SCHEDULE

SE Effort = SE Quality * (SE Cost/Actual Cost)

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MCPM – MATURITY BY PROJECT
CATEGORY MODEL, BRAZIL

Archibald & Prado, “PM Maturity 2006 Research –Maturity and Success in IT”, March, 2007

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CMU/NDIA 2007 STUDY RESULTS

Source: “A Survey of Systems Engineering Effectiveness”, CMU/SEI-2008-SR-034, December 2008

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PROJECT ENGINEERING MATURITY
MATRIX
Maturity Level Characteristics Key Process Areas
Increased
Feedback: System problem prevention Customer
5 OPTIMIZING Process Continuously Technology innovation and
Improved Process management Producer
Satisfaction
Quantitative: Process mapping/variation
4 MANAGED Process Measured Process improvement database
Focus on metrics Quantitative quality plans

Enterprise process definition


Qualitative: Education and training
Process defined and Review and testing
3 DEFINED institutionalized Interdisciplinary teamwork
Life cycle engineering
Focus on process org. Integrated systems management

System requirements mgmt


Intuitive: Project planning and tracking
2 REPEATABLE Process depends on System configuration mgmt
individuals Quality management
System risk management

Ad hoc/chaotic: Increased
1 Unpredictable Risk

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practices used on projects, collect performance data on these projects, and identify relationships
between the application of these SE best practices and project performance.
SEI/AESS/NDIA 2012
The study found clear and significant relationships between the application of SE best practices to
STUDYprojects
RESULTS
and the performance(1)
plained below.
of those projects, as seen in the mosaic chart in Figure 1 and as ex-

100%
90% 15% Higher
Project Performance (Perf)

24% Perf
80%
70% 33% 57%
60% Middle
50% 47% Perf
40%
30%
52% 24%
20% Lower
10% 29% 20% Perf
0%
Lower SEC (n=48) Middle SEC (n=49) Higher SEC (n=51) All Projects
Total Systems Engineering Capability (SEC-Total)
Gamma = 0.49 p-value < 0.001

Figure 1: Project Performance vs. Total SE Capability

Source: The
“Theleft column represents
Business Case forprojects
Systemsdeploying lower levels
Engineering of SE,
Study: as measured
Results of the by assessingEngineering
Systems the
quantity and quality of specific
Effectiveness SE work
Survey”, products. Among these projects,
CMU/SEI-2012-SR-009, only 15%
November 2012delivered
higher levels of project performance, as measured by satisfaction of budget, schedule, and tech-
nical requirements. Within this group, 52% delivered lower levels of project performance. Page 35 of 48

P1314-005216-3 The second column© represents those projects


Copyright Project Performance deploying
(Australia) Pty Ltd 1998-2018moderate levels of SE. Among these pro-
SEI/AESS/NDIA 2012
STUDY RESULTS (2)
Low PC High PC

100% 100%
8%
90% 23% 23% 90%
26%
80% 80% 23%
70% 52% 70% 62%
60% 60%
45% 35%
50% 58% 50%
40% 40%
69% 12%
30% 36% 30%
20% 20% 39%
32% 27%
10% 19% 10%
12%
0% 0%
Lower SEC Middle SEC Higher SEC Lower SEC Middle SEC Higher SEC
(n=22) (n=26) (n=25) (n=26) (n=23) (n=26)
Gamma = 0.34 p-value = 0.029 Gamma = 0.62 p-value < 0.001

Figure 3: Project Performance vs. Total SE Capability controlled by Project Challenge


Legend: PC Project Challenge
The chart on the right side of Figure 3 shows a very strong relationship between SEC-Total and
Source: “The
PerfBusiness Case for
for those projects Systems
with higher PC.Engineering Study:
The percentage Results
of projects of the Systems
delivering Engineering
higher performance
Effectiveness
increased from 8% to 26%Survey”,
to 62%CMU/SEI-2012-SR-009,
as SEC-Total increased from November 2012to higher. Addi-
lower to middle
tionally, the percentage of projects delivering lower performance decreased from 69% to 39% to Page 36 of 48

27% as SEC-Total increased.


P1314-005216-3 © Copyright Project Performance (Australia) Pty Ltd 1998-2018
SEI/AESS/NDIA 2012
STUDY RESULTS (3)
Relationship to Performance
Driver (Gamma)
All Projects Lower challenge Higher challenge
SEC-Total – total deployed SE +0.49 +0.34 +0.62 Gamma Relationship
SEC-PP – project planning +0.46 +0.16 +0.65 -0.2 <| Gamma | ≤ 0 Weak negative

SEC-REQ – reqts. developt. & mgmt. +0.44 +0.36 +0.50 0 ≤ | Gamma | < 0.2 Weak positive

SEC-VER – verification +0.43 +0.27 +0.60 0.2 ≤ | Gamma | < 0.3 Moderate

SEC-ARCH – product architecture +0.41 +0.31 +0.49 0.3 ≤ | Gamma | < 0.4 Strong

SEC-CM – configuration management +0.38 +0.22 +0.53 0.4 ≤ | Gamma | Very strong

SEC-TRD – trade studies +0.38 +0.29 +0.43


SEC-PMC – project monitor & control +0.38 +0.27 +0.53
http://resources.sei.cmu.ed
SEC-VAL – validation +0.33 +0.23 +0.48
u/asset_files/specialreport/
SEC-PI – product integration +0.33 +0.23 +0.42 2012_003_001_34067.pdf

SEC-RSKM – risk management +0.21 +0.18 +0.24


SEC-IPT – integrated product teams +0.18 -0.12 +0.40

Source: “The Business Case for Systems Engineering Study: Results of the Systems Engineering
Effectiveness Survey”, CMU/SEI-2012-SR-009, November 2012

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positive positive positive
SEC-PI product integration +0.33 Strong +0.23 Moderate +0.42 Very strong
SEI/AESS/NDIA 2012 positive positive positive

STUDY RESULTS positive


SEC-RSKM risk management
(4)
+0.21 Moderate +0.18
positive
Weak +0.24
positive
Moderate

SEC-IPT integrated product +0.18 Weak -0.12 Weak +0.40 Very strong
team utilization positive negative positive

Table 10: Summary of Relationships Between Other Factors and Project Performance
Driver Relationship to Performance
All projects Lower challenge Higher challenge
projects projects
PC – Project challenge -0.26 Moderate -0.26 Moderate -0.23 Moderate
negative negative negative
EXP – Prior experience +0.36 Strong +0.51 Very strong +0.19 Weak
positive positive positive

The data in“The


Source: Tables 8 andCase
Business 9 arefor
illustrated
Systems in Figures 70
Engineering through
Study: 72. of the Systems Engineering
Results
Effectiveness Survey”, CMU/SEI-2012-SR-009, November 2012

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A Look at Return on Investment
for One Facet of Systems Engineering:
Requirements Analysis

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Initial (Originating)
Stakeholder
Requirements (if any)
- e.g. user.
(SyRS, e.g. URS)
SyRS-Refined

2 6

Ref. AND AND Ref.

4.2.1
5
AND AND
4

4.2.2

3
5
LP OR OR LP
4.2.3

Other Info 4.2.4

VRS
OCD
Analytical work products
VM
OCD: operational concept description (CONUSE) is a restatement of
URS: SyRS of user requirements traces to/from
SyRS: system requirements specification
VM: value (or system/software effectiveness) model
VRS: verification requirements specification
PPI-005499-4

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REQUIREMENTS ANALYSIS IDENTIFY
(CAPTURE AND VALIDATION) STAKEHOLDERS

METHODOLOGY READ & MEASURE


*
ASSESS REQUIREMENTS
Legend: INPUTS QUALITY
SRA System Requirements Analysis
S/H Stakeholder
DEV Development PLAN
OCD Operational Concept Description (CONUSE) THE SRA
ERA Entity Relationship Attribute

* Perform only if there are initial specified


requirements as an input to the analysis. *
DESIGN
CONTEXT REQUIREMENTS
ANALYSIS ANALYSIS

STATES & S/H VERIFICATION OCD


MODES VALUE REQUIREMENTS DEVELOPMENT
ANALYSIS ANALYSIS DEV.

* OTHER
FUNCTIONAL PARSING ERA CONSTRAINTS
ANALYSIS ANALYSIS ANALYSIS SEARCH

REST OF
SCENARIO
ANALYSIS

OUT-OF-RANGE
ANALYSIS

CLEAN-UP
PPI-006248-2
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REQUIREMENTS QUALITY
Requirements Quality AND
and Requirements Analysis Effort
REQUIREMENTS ANALYSIS EFFORT
0.85-0.98
1 1 Need
Risk L 0.9
WORK!
(SRA)
WORK = f(
Have Have
Risk M
0.5
Need
.3 Number of Requirements
Skills
Risk H Tech-Environment
Access & Cooperation)
0 0
P007-004138-4
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IMPACT OF REQUIREMENTS DEFECTS

Overruns Attributed to
Organization/Project
Requirements Problems
NASA over two decades (Werner 70% of overruns
Gruhl)
U.S. Census Bureau project 2009 80% cost overrun locked in solely due to
poor requirements
Marine One Helicopter Program 83% cost overrun attributed by Lockheed
to requirements problems
Schwaber, 2006; Weinberg, 1997; “Requirements errors are the single
Nelson et al, 1999 greatest source of defects and quality
problems”
Hofmann and Lehner, 2001 “Deficient requirements are the single
biggest cause of software project failure”
Standish Group, The Chaos Report on 60.9% of an average 89% cost overrun
8300 IT projects

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REQUIREMENTS ANALYSIS ROI TO
CUSTOMER

Parameter Value
Contract value $4B
Requirements on the Ship 27,000, only fair in quality
Consequence if uncorrected At least 20% loss of capability, costing at
least $800M; or
Rework costs exceeding 20%
Cost of fixing the requirements $8M (0.2% of contract value)
Return on Investment Approximately 100:1

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REQUIREMENTS ANALYSIS ROI FOR A
CONTRACTOR

Paramater Value
% Sales spent on marketing 12.5%
% Sales spent on bidding 9-10%
Win ratio for the more successful 1 in 2 to 1 in 4
companies
Typical cost/bid, % Total Contract Value 2-3% TCV
Cost of winning business from a new 5:1
customer vis-à-vis a satisfied existing
customer
Cost of preserving customer satisfaction 0.2% TCV
through requirements analysis

TCV: Total Contract Value

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CONCLUSIONS:

1. The practice of engineering can be immature


• Sometimes ad hoc and chaotic – that is destructive to success via
satisfaction of users and other stakeholders.

2. The evidence is now compelling that the practice of systems


engineering contributes to enterprise success in terms of:
• reduced costs
• shorter timeframes
• increased value achieved in using the system.

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CHALLENGES – HOW DID WE GO?

We will review the list of challenges


from earlier, and the contributions
made by "a systems approach to the
engineering of systems".

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THE QUESTION IS NO LONGER, “SHOULD WE BE
PRACTICING SYSTEMS ENGINEERING?”
"YES" IS BEYOND DOUBT.

TODAY'S QUESTION IS,


“HOW BEST DO WE DO IT?”

Robert J. Halligan
Email: rhalligan@ppi-int.com

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