Engineering Economics of Life Cycle Cost Analysis

Cover
Half Title
Title Page
Copyright Page
Contents
List of Abbreviations
Preface
Acknowledgments
About the Authors
SECTION 1: The Mathematics of Engineering Economy
	Chapter 1: Overview of Systems Life Cycle Costing
		1.1. Overview of Engineering Economic Analysis
			1.1.1. Business Operations
			1.1.2. Customer Relationships
			1.1.3. Engineering Services
			1.1.4. Product and Process Realization
		1.2. Engineering Challenges for the 21st Century
		1.3. Introduction to Systems Life Cycle Costing
			1.3.1. Systems Life Cycle Costing
		1.4. Cost Analysis, Estimation, and Management
			1.4.1. Cost Analysis
			1.4.2. Cost Estimation
				1.4.2.1. Parametric Cost Estimation
				1.4.2.2. Analogy Cost Estimating Methodology
				1.4.2.3. Engineering Build-Up Methodology
			1.4.3. Cost Management
		1.5. Summary
		References
	Chapter 2: The Science of Engineering Economics: Understanding the Time Value of Money
		2.1. Introduction and the Time Value of Money
		2.2. The Capital Budgeting Decision
			2.2.1. Basic Concepts in Capital Budgeting
			2.2.2. Benefit and Cost Development
		2.3. Time Value of Money
			2.3.1. Cash Flow Diagram Rules
		2.4. Interest
			2.4.1. Simple Interest
			2.4.2. Compounded Interest
			2.4.3. The “Rule of 72”
			2.4.4. Compound Interest Notation and Interest Tables
			2.4.5. Interest Compounded Other Than Yearly
		2.5. Common Cash Flow Series
			2.5.1. Single Period Cash Flow
			2.5.2. Uniform Cash Flow Series
			2.5.3. Linear Gradient Cash Flow Series
			2.5.4. Irregular Cash Flow Series
		2.6. Concept of Economic Equivalence
		2.7. Amortization Schedules
		2.8. Summary
		Bibliography
		References
	Chapter 3: Advanced Economic Analysis of Alternatives
		3.1. Introduction
		3.2. Net Present Value
			3.2.1. NPV in Excel
		3.3. Annual Equivalent Worth
			3.3.1. Introduction
			3.3.2. Unequal Service Lives Using AEW
		3.4. Capital Budgeting: Selection of Multiple Projects
		3.5. After-Tax Cash Flow Analysis
			3.5.1. Depreciation
			3.5.2. Corporate Income Taxes
		3.6. Income and Cash Flow Statements
		3.7. Summary
		Bibliography
		References
	Chapter 4: The Basic Theory of Interest
		4.1. Introduction
		4.2. Interest as Time Value of Money
		4.3. Inflation
			4.3.1. Determining Inflation and Deflation
		4.4. Disinflation, Deflation, and Stagflation
		4.5. Market Interest Rates
			4.5.1. United States Treasury Debt
			4.5.2. Debt
			4.5.3. Equity
			4.5.4. Minimum Attractive Rate of Return
		4.6. Summary
		Bibliography
		References
	Chapter 5: Simulation-Based Costing
		5.1. Introduction
			5.1.1. Ways to Study a System
			5.1.2. Advantages and Disadvantages of Simulations
		5.2. Review of Probability and Statistics
			5.2.1. Introduction
			5.2.2. Random Variables
			5.2.3. Probability Density Functions
			5.2.4. Cumulative Distribution Functions
		5.3. Discrete Process Generators
		5.4. Continuous Process Generators
		5.5. Probability and Statistics Summary
		5.6. Simulation in Practice
			5.6.1. Introduction to Simulation in Practice
			5.6.2. Building Complex Simulations
		5.7. Using Readiness Levels for Model Input
		5.8. Simulation Using Spreadsheets
			5.8.1. Introduction
		5.9. Building Systems Simulations
			5.9.1. Introduction
			5.9.2. Using Expert Elicitation for Data Development
			5.9.3. Adjusting for Bias
		5.10. Sensitivity Analysis
		5.11. Summary
		References
SECTION 2: Cost Estimation of Complex Systems
	Chapter 6: Life Cycle Framework and Techniques
		6.1. Introduction to Developing Life Cycle Models
		6.2. Developing LCC Models
		6.3. Life Cycle Costs Categories
			6.3.1. Industrial Base and Supplier/Vendor Relationships
			6.3.2. Research, Development, Testing, and Evaluation
			6.3.3. Acquisition
			6.3.4. Operations and Support
			6.3.5. Disposal or Retirement
			6.3.6. Summary of Life Cycle Categories
		6.4. Billable Rates
		6.5. Costing Labor
		6.6. Summary
		Bibliography
		References
	Chapter 7: Costing of Complex Systems
		7.1. Introduction
		7.2. Issues Surrounding Complex Systems
		7.3. Systems Engineering and Management Costs
			7.3.1. Hardware
			7.3.2. Software
			7.3.3. Interfaces and Integration at the Component and System Level
			7.3.4. Systems Engineering and Project Management Costs
		7.4. From Requirements to Architectures to Costs
		7.5. Summary
		References
	Chapter 8: Software-Intensive Systems
		8.1. Introduction
		8.2. Software Estimating Techniques
			8.2.1. Overview
			8.2.2. Expertise-Based and Hybrid Models
			8.2.3. Algorithmic Models
				8.2.3.1. Original or Basic COCOMO Model
				8.2.3.2. Phase Distribution of Effort and Schedule for Organic Mode
				8.2.3.3. Intermediate COCOMO
				8.2.3.4. Advanced COCOMO
			8.2.4. Function Points
			8.2.5. Costing Software with Agile Development
		8.3. Summary
		Bibliography
		References
		Appendix 8.A Effort Multiplier for the Intermediate COCOMO Model (from Boehm et al., 2000) ...........221
	Chapter 9: Cost Estimating Techniques
		9.1. Estimating Life Cycle Costs Throughout the Product Development Cycle
		9.2. Analogy
		9.3. Parametric Cost Estimating
			9.3.1. The Role of Statistics
			9.3.2. Some CERs of Interest
				9.3.2.1. Wright’s Method
			9.3.3. Summary and Conclusions
		9.4. Detailed Engineering Builds
		9.5. Summary
		References
	Chapter 10: The Role of Risk, Value, and Cost in Making Decisions
		10.1. Introduction
		10.2. Common Decision Analysis Tools
			10.2.1. Decision Trees
			10.2.2. Decision-Making Based upon Value Analysis
			10.2.3. Pugh Matrix
			10.2.4. Summary
		10.3. Risk
			10.3.1. Overview
			10.3.2. Risk Buffers
		10.4. Integrating Risk, Value, and Costs for Decision Analysis
		10.5. Making Defensible and Transparent Decisions
			10.5.1. Bias
		10.6. Summary
		Bibliography
		References
	Chapter 11: Costing the Cloud, Data, and Machine Learning
		11.1. Introduction
		11.2. The Role of the Cloud
		11.3. Costing Data
		11.4. Cost Considerations for Artificial Intelligence and Machine Learning
		11.5. Conclusion
		Bibliography
		References
SECTION 3: Cost Management
	Chapter 12: Costing and Managing Off-the-Shelf Systems
		12.1. Introduction
		12.2. Commercial Off-the-Shelf Systems
			12.2.1. Hardware-centric COTS
			12.2.2. Software-centric COTS
			12.2.3. Integration Costs
		12.3. Gots
		12.4. Software Reuse
			12.4.1. Cost Reductions Achieved with Software Reuse
		12.5. Open Source
		12.6. Summary
		Bibliography
		References
	Chapter 13: Project Management’s Role in Life Cycle Costing
		13.1. Introduction
		13.2. Basics of Networks
		13.3. Work Breakdown Structure
		13.4. Progress Measurement
		13.5. Calculating Earned Value
		13.6. Monte Carlo Simulation of Networks
		13.7. Summary
		Bibliography
		References
	Chapter 14: Use of Cost Metrics and Ratios
		14.1. Introduction
		14.2. Benefit-Cost Ratio
		14.3. Return on Investment
		14.4. Cost-Benefit Analysis
		14.5. Expected Value
		14.6. Sensitivity Analysis
		14.7. Breakeven Analysis
			14.7.1. Breakeven Quantity
			14.7.2. Conventional Payback Period
			14.7.3. Discounted Payback Period
			14.7.4. Breakeven Charts
		14.8. Internal Rate of Return
			14.8.1. The Compounding Equation
			14.8.2. The Quadratic Equation
			14.8.3. Trial-and-Error Method
			14.8.4. IRR in Excel
			14.8.5. Incremental IRR
		14.9. Summary
		References
Appendix A
Appendix B
Index