Tag Archives: Risk Management


Improving Acquisition From Within Suggestions From Our PEOs

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By: Frank Kendall

kendall-200This year I asked all of our Program Executive Officers (PEOs) to provide short assessments and recommendations to me directly. The result, as it was for the Program Manager Assessments I’ve received for the last 2 years, has been a treasure trove of observations and recommendations covering a wide range of topics. I thought it would be useful and insightful for the entire workforce to see some of these professional, and very frank, comments. I’ve removed most inputs that were about specific programs and edited lightly to make some of the inputs less Service specific. Arranged alphabetically by topic, and presented without comment, here is a sampling of the topics on our senior line managers’ minds as they confront the many challenges we face.

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A Primer on Risks, Issues and Opportunities

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By: Thomas L. Conroy II, Ed.D.

Risks, issues and opportunities are programmatic hurdles for many acquisition personnel. For example, program offices deal with technical risks in the form of technologies that are not mature enough or are unable to provide the same capability in production that was achieved in development. They also deal with cost risks such as an insufficient budget or budgetary cost overruns and program efforts that take longer than scheduled due to requirements growth.

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Robust, Replicable and Defensible Risk Management At Headquarters or the Front

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By: Eugene A. Razzetti

Terms like risk analysis, risk assessment, and risk management often are used interchangeably and can include a variety of different concepts or strategies. Approaches can be simple or complex, although simpler is almost always better. Properly conducted risk management permits decision making based on realistic scenario assumptions and provides defensible justification, before limited resources are committed.

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Enhancing Cost Realism through Risk-Driven Contracting: Designing Incentive Fees Based on Probabilistic Cost Estimates

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Authors: Maj Sean P. Dorey, USAF, Josef Oehmen, and Ricardo Valerdi

A risk-driven contract structure is proposed to enhance the cost realism of competitive proposals for the Engineering and Manufacturing Development (EMD) phase of the acquisition life cycle. The authors employ an economic theory framework to discuss how cost-plus contracts typically used during this phase have inadvertently reinforced the sources of contractor and government optimism bias. By mapping probabilistic cost estimates to profit distributions, risk-driven contracts offer a structured method to expose contractors to more cost risk during EMD. Holding contractors accountable for their cost estimates and cost performance should enhance the realism of cost proposals, limit the government’s ability to commit to too many programs, and reduce the cost growth that continues to plague the defense acquisition system.

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Employing Risk Management to Control Military Construction Costs

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Authors: LTC Steven M. F. Stuban, USA (Ret.), Thomas A. Mazzuchi, and Shahram Sarkani

Systems acquisition inherently contains elements of uncertainty that must be effectively managed to meet project cost, schedule, and performance objectives. While the U.S. Department of Defense has a record of employing systems engineering technical management processes (including risk management) to address these uncertainties for major weapon systems acquisition, the application of risk management to Military Construction (MILCON) projects is a recent development. This research studies the use of a formal risk management program on a MILCON project and assesses whether such use influences the project’s total cost growth relative to that of U.S. Army Corps of Engineers’ historical data. A case study methodology is employed assessing the National Geospatial-Intelligence Agency (NGA)’s multibillion dollar NGA Campus East program.

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