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Answers to Selected Questions

Barry BoehmCS 510, Pre Midterm 2

November 4, 2015

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Reference: EC-7, Maximize Effectiveness/ Cost Ratio. It is one of the most commonly used decision criteria, but how exactly is this criterion used? The decision criteria works in the following order:· Initially create product function graph for Option A and Option B.· Evaluate the effectiveness/cost ratio by plotting the straight line respectively· Compare the ratio, go ahead with the option which has a better ratio.When other criterions like DSC and weighted sum analysis fail to provide a decision on what option to choose, is this the right way to analyze the problem?[Includes copy of EC-7 slide 24.]

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Maximum Effectiveness-Cost Difference

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1207

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4400 B-Build new OS

A-Accept available OS

Cost C, $K

ThroughputE(TR/sec)

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I am a little bit confused about the Meta decision problem. I was wondering if there was an example that could illustrate this problem. (EC-8s slide 18)

Think about choosing a hamburger.

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Meta-Decision Problems

Lower Cost More Stability

Lowercost

More insight

The system decision problem

The system analysis decision problem11/4/15

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The question is about the advantages of Weighted Sum, which in Page 240, Chapter 15, EP-9.pdf. The third line indicates that the weighted sum technique is better at assessing side effects of DC and AV. And the reason is Òthe weighted sum technique allows the evaluator to reflect this in weights and ratingsÓ. I am little confused about the reason, is that mean in that case the weighted sum will get roughly same result with DSC? And in that case, the weighted sum is better whether because it easy to implement and will get roughly same answer with DSC?

Consider alternatives with radically different performance or reliability, such as in choosing a computer or COTS product.

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From EP-7 pages 174-176, it discusses how we must be careful when solving for Nmax because there may be multiple maximums and multiple minimums as is the case in Figure 10-3 and Figure 10-4. If we know the equation for E(N) (which is E(N) = [N(S-P-M(N-1))]/T ), then when and how could N ever be cubed or quadrupled to produce multiple maximums/minimums? Will the E(N) equation ever change? Can you give examples/scenarios when N would have multiple maximums/minimums? If there are multiple maximums/minimums, which maximum/minimum do we accept as Nmax: global or local?

Consider trying to climb the world’s highest mountain, starting in Hollywood.

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For Homework 5, if we take the Nmax from the slides, Nmax will be 5 for Option A and 10 for Option B. But if we calculate the number of N, since the result might not be an integer, how do we round it up? In the homework, we take 10.25 or 10.375 as 10, but if it is 10.75, do we take it as 10 or 11? Should we just abandon the portion or round it up to the closest integer?

Evaluate the value for the two nearest integers, and choose the integer with the higher value. If they are the same, choose another key criterion and choose which integer gives the best answer (for example, 10 for lower cost and 11 for higher reliability.

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In section 10.2 in EP-5, it says that there are a number of considerations, such as risk, operational constraints user morale and growth, to choose a solution. So under such complex situations, how should we make an optimal solution? Is it possible to make an utility function or just make a brief judgment?

There are a number of ways that you can provide a composite utility function. Chapter 15 provides the Weighted Sum and Delivered System Capability as candidates. Chapter 16 says that you can reduce the dimensionality by imposing constraints, such as on available skilled performers or computing capability. Chapter 18 provides ways of visualizing the decision situation, with ways of prioritizing the criteria and for dropping unsatisfactory alternatives. There are other ways that you can have the key stakeholders vote on their preferred alternatives, such as giving them $100 in virtual currency to distribute across their preferred alternatives, or by giving them 10 votes that they can distribute by holding a number of fingers up as each alternative is voted on. Each approach has advantages and disadvantages in various situations.

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In HW6, when we calculate the present value of company M, we calculate the absolute sum of initial amount 50k and 20 times the discounted rate for amount 450k and 24times the discounted rate for 120k. My question was the initial amount is paid out in full 50k that should be calculated also right like 20times the discounted rate of 50k and the 450k is paid out at 20th month so 4times the discounted rate of 450k so on. What would go wrong of this type of calculation and why do we do the calculation similar to the first approach?

The various components of the payment are negotiated between the customer and the bidder. For Company M, it may need an initial $50K to establish a local office and work out communications with their remote main office where the work will be done, while the customer may want to pay only on satisfactory delivery and on satisfactory installation and training. Since Company L is doing the work locally and progress can be locally monitored, the customer is willing to pay them incrementally so that they can pay their performers.

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In “software decision analysis techniques” slide , we use present value to analysis A1 and A2. However, to calculate present value by using interest also has risk, such as inflation and interest rate fluctuations. Should we consider these factors? Will it affect the result and in which situation?

You can try to forecast the changes in interest rates, but this is difficult. Another way is to determine a present value range by using optimistic and pessimistic changes in interest rates.

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On pages 217 and 218 of EP-6, the text discusses the formula given for doing a present value analysis for a series of cash flow problem, which applies when we have m equal payments p that are made at the beginning of each month. Using eq 14-3, we can see that the first payment in a cash flow series (when m = 1) would have no depreciation as the numerator and denominator of the fractional portion of the component are equal to each other and reduce to 1, leaving us with the full sum p. How would the present value analysis for of a series of cash flow problem change if instead of being made at the beginning of the month, the payment is made at the end of the month? Would the first payment made depreciate over the course of that first month and have a smaller present value if it is being made on the last day of the month vs the first day of the month? Would our total number of m equal payments increase by 1 (to show the depreciation of the first month), which we could later fix by subtracting the first month off? Will we see this type of modified problem on the exam?

As you can see from question 14.9 on page 222, this is a question that we sometimes use on homeworks and exams, but aren’t using this year. Basically, the answer is to take the solution for the beginning-of-the-period case and multiply it by D, as each cash flow comes one period later.

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In homework 5, we are asked to compare the Net Value and ROI of Option A and B under different value of TR/sec. From the given solution (calculate the Nmax method), as for the comparison between A and B on ROI, it use 5 and 10 as Nmax directly. I am not sure these Nmax were calculated using derivative to get the marginal value(4.57 for A, 9.59 for B and get rounded to 5 for A, 10 for B), or just used the same numbers during the Net Value comparison part. I think the former one is more scientific and reasonable, am I right? Ref: hw-5 EP5-chap 13.3

Right. As with the answer to a previous question, if the optimum lies between integers and integers are the only feasible solutions, it’s best to evaluate the integers below and above the optimum and pick the better one.

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What’s decision driver analysis? I understand its part of Risk Identification as described in Risk Analysis PPT slide 21 and 22 but what exactly is a decision driver analysis? What is the meaning of a decision driver? Is it a factor or a person that influences the decision?

Decision Driver Analysis is trying to find out the main reason(s) for why a project is scoped, budgeted and scheduled the way it is. Sometimes it may be that the budget is fixed at the amount remaining to be spent by the end of the year. Sometimes it is to scope a project to favor a favorite competitor’s technology (if you can find this out, you can save money and effort by declining to submit a bid). Sometimes a government contract is scheduled to deliver and demonstrate in October of an even-numbered year, so that the local Congressperson can influence local voters to appreciate what they are doing for the community and vote for them in November.

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From HW 5, 6 & 7, we discussed about MedFRS project, I tried to imply the Risk ID: Examining Decision Drivers from EC-11 concept. I have trouble to imply the concept of “solution-driven versus problem-driven” in this case, could professor explain how to identify the solution-driven and problem-driven decision driver in MedFRS project? Reference EC-11, slide 31.

Often there is a gray area between the two. For example, choosing the local Company L may be solution-driven since it will benefit the local community. But it would also be problem-driven since it would be easier to monitor the progress of a local company, as compared to a company doing most of the work a long distance away, without familiarity with local medical practices.

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In EC-10 slide 13, we are going to use 10K to build a prototype, so If prototype succeeds, we choose BB and the Payoff is $250K - 10K = $240K; If prototype fails, we choose BC and the Payoff will be $50K - 10K = $40K; If equally likely, Ev = 0.5 ($240K) + 0.5 ($40K) = $140K. It says we can invest up to 50K and do better than before, so the EVPI = $50K. I am wondering where does this $50K come from? From my point of view I think is because Ev(BB) = 0.5(250) + 0.5(-50) = 100, so we have the new Ev - Ev(BB) = 40K, then we add the 10K prototype we get 50K, which by the way it makes no sense! Can you please explain this in more details.

Consider spending $51K on the prototype. Then If prototype succeeds, we choose BB and the Payoff is $250K - 51K = $199K; If prototype fails, we choose BC and the Payoff will be $50K - 51K = $-1K; If equally likely, Ev = 0.5 ($199K) + 0.5 ($-1K) = $99K. This is worse than doing no prototype at all and choosing Bold, where the payoff is 0.5*$250K + 0.5* $-50K = $100K.

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<Risk> From HW 8, we only discussed Risk Avoidance, Risk Transfer, Risk Reduction, Risk Acceptance except Buying Information. From textbook, Chapter 15.2.2, page 243 “The best one to try first is buying information, which will provide more insight on which of the strategies to employ.” also on page 244 “Buying Information.” So related to HW 8, how buying information strategy will affect the project? Will it increase other risk in the project? And to what extent should we buy the information?

HW8 also indicates that Company L bought information by selecting Prototype X, which provided insights on further prototypes that would buy more useful information, but would add delays to the project. The four other alternatives of Risk Avoidance, Risk Transfer, Risk Reduction, and Risk Acceptance provide ways to engage the stakeholders in deciding whether or not to do the further prototype.

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In part 3 of Homework 7, different alternatives for prototypes are given, along with dollar estimates of how much the risk would be reduced for each alternative. How does one come up with these types of estimates? It seems like it would be really tricky, if not impossible, to come up with something that exact (not to mention accurate).

When you’re dealing with risks and prototypes, there is indeed a lot of uncertainty. A lot of the activity is opportunistic assessment of the stakeholders and their value propositions, the technology, the marketplace, the competition, etc. Just to evaluate the alternative prototypes, such information is necessary, incomplete, and also a source of added effort in buying information to reduce risk.

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Please explain the concept of Risk Reserve, more specifically is it only related to an extra cost and time delay in schedule as seen in the Risk Analysis lecture slide 8.

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Chapter 19 of EP-7, page 285, discusses the subjectivity of utility functions and gives an example of a managerÕs utility function and under which circumstances he or she would either decline or accept a business opportunity. What are some practical approaches to convincing a group of decision-makers to proceed with a proposal if their utility functions vary drastically? For example, one decision-maker is completely reluctant to accept any potential loss while the other is acceptable of loss so long as thereÕs potential for large gain. Furthermore, page 286 explains that peopleÕs utility functions arenÕt necessarily constant, may vary with time, and can be influenced by other personal variables. Knowing that these factors can be unpredictable, from the perspective of the person giving the proposal, what can be done to alleviate some of the bias the decision-makers may have that influences their utility functions?

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In our work relating to the expected value of information, we did a lot of math with certain probabilities. In real world systems, where do these numbers come from, and considering that perfectly known probabilities are unlikely, how do we deal with knowledge about our knowledge (e.g. approach B has a 60% of success and we're 70% certain that that number is reasonably accurate).

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1) I am having difficulty understanding the difference between an event-based review and the evidence-based review. The two seem to have the same entrance criteria with only the content being different. If so, why not just limit the content of an event-based review to avoid this Òdeath by powerpoint/UMLÓ scenario?

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1) The term Òaward feesÓ was used in Chapter 15 (pg 244 under the Risk Transfer bullet) of the book; what exactly is an Òaward feeÓ and how does this contribute to the budget of the project?

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Question I: In homework 6 solution question #2 example factor #1, could you explain what is Òlow-defectÓ products and how company L personnel be part of the Ensayo-region community relates to Òlow-defectÓ products? For example, I can understand that when the product meets a defect which cause patients in a crisis, developers or support people can be there faster due to physically near. But how this kind of quick responses relates to low-defect? Since defects already there when making a series of response actions, which opposite to near location lead to low- defect product. Also in factor #3, the contract would be a boost in the Ensayo-region economy and a source of local jobs. But how boost economy directly or indirectly benefits the MedFRS critical stakeholders? ItÕs hard for me to see much benefits from boost economy, because in the perspective that boost economy would lead to boost of population, which could cause higher pressure of the MedFRS system and so need higher performance and scalability for the system. Eventually, bring more cost and longer schedule time to develop the system.

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