Quantitative Techniques for DARPA Program Risk Management,

Meridian Corporation has developed an approach to risk assessment and contingency reserve allocation which draws upon numerous statistical and empirical techniques to evaluate contractor performance. The approach is motivated by the need to anticipate, at the highest levels of program management, potential cost overruns so that corrective or pre-emptive actions may be initiated early in the development cycle. This paper discusses the nature of the analytical tools used to assess the risk of cost growth and describes the application of these tools to an individual DARPA program. The approach presented in this paper intended to supplement rather than to supplant traditional methods of contract cost analysis. It is oriented toward the needs of senior level decision-makers who must evaluate in the aggregate the requirements for contingency reserves and who have ultimate responsibility for the successful completion of the program within established cost, schedule, and technical constraints. It is designed to be used in conjunction with the more detailed management analyses of specific projects to illuminate trends in cost growth and to provide a comparison to heuristic models and empircally-derived cost distributions.