APMP Cost Task Force Industry / Government Questions & Responses
Here is the summary of the questions and responses from 2010 that were obtained regarding the APMP task force charter to make government and industry work better together in cost analysis. This is posted in advance of the task force telephone conversation on December 21, 2011.
If you would like an invite to that call or would like to join the task force please email Dan Galorath.
Probe further into causes for differences between Industry proposed costs and Government evaluated most probable costs
Understand differences in the approaches behind developing Industry cost proposals and performing Government cost evaluations
Identify contradictory assumptions
Industry
How do you determine the price you will propose?
What type of estimate do you prepare?
How far down in the WBS do you prepare it?
Government
When preparing your internal estimate, what is your technical baseline?
How detailed are your estimates, e.g., level of WBS? What are your estimating methodologies? What is your historical data?
Would you consider providing this information to industry as part of the solicitation request, especially if there is an incumbent?
Why discrepancies might exist
What might industry do to provide a realistic cost proposal?
What might government do to receive a realistic cost proposal
Industry
What types of assumptions do you make to support your estimate?
Do you clearly define these as assumptions?
Do you desire more information from the Government?
How much detail do you provide to substantiate your price? Do you prepare detailed justifications?
Government
How much detail is needed to substantiate bidders’ cost?
Is there a format that you might like to see this information in so that you can compare apples-to-apples?
Cost Proposal Substantiation
What might industry do to provide more consistent substantiation?
What might the Government ask for to ensure that it gets the level of detail it is seeking?
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
New SEER Labor Rate Calculator: A Leap Forward in “Should Cost” & “Will Cost”
I saw a demo today of our new labor rate calculator. It takes in various labor rate drivers and computes a viable labor rate. It even evaluates the cost of equipment, electricity, floor space, insurance, etc.
This is a great step forward in the “should cost” and will cost for product manufacturing. Buying organizations can describe the problem and see what a fair labor rate for the region, country, machine, etc. Mixed currencies are supported as well.
The following is a small example of the kinds of information that can be specified In this case it is configured for manufacturing.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Frank Vogelezang Pricing Vs Costing & Proof That IT Systems Can Be Estimated
Frank Vogelezang of Ordina‘s presentation at the Galorath conference in the Netherlands yielded numerous interesting and well prepared presentations by customers and partners. The presentation included here: Estimating & Pricing of Application Management covered the processes for estimating what the problem will cost and the separate processes for pricing what will be charged to the customer.
Estimation Vs Pricing
Estimation was described as an engineering discipline while pricing was described as a commercial discipline that leads to a structure optimized to win the deal with an offering that meets customer acceptance criteria.
SEER Validation of the COMPLETE SYSTEM
The part I found even more interesting was the SEER validation included within the paper. This validation compared the IT total system cost, including software development estimated by SEER-SEM, IT infrastructure (hardware, bandwidth, etc.) and IT services estimated by SEER-IT, and other (pass through) items estimated via manual processes. The results were good even before any calibration, and even better after they calibrated with some of their history.
One Size Fits All Models Versus SEER
Frank pointed out the risks of using simple cost estimating relationships for estimating and defined the reasons why they choose SEER including:
- The estimating model needs to have a breakdown structure that can accommodate different cost-drivers
- Requirements for a supporting tool: Ability to facilitate a breakdown with different cost-drivers Based on experience data
- Possibility of calibrating the data with own experience
- SEER for IT as the basis for the model Six types of knowledge bases (out of 12)
- SEER for Software for Application Development calculations
WBS In SEER IT Infrastructure, IT Services, Software Development
Results before calibration (at a 50%) probability were slightly higher than actuals. With calibration they were within a few percent. And again, this was the entire system estimate including software, hardware, services, and other costs.Be sure to check out Frank’s blog http://www.ThePriceofIT.blogspot.com for more insights from him on a variety of relevant topics.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
APMP Cost Taskforce November 2011: Helping Calm the Storm of Budget Cuts Via Cost Analysis
During the November 2011 meeting the APMP cost task force regrouped with Dan Galorath as the Chair. The cost task force’s mission is to help resolve the differences between government and contractor positions in cost. The PowerPoint including the history and new goals is here. Quintin Redmond also offered his systems engineering paper Why Affordability Is A Systems Engineering Metric to the group.
We determined to resurrect the earlier document covering government and contractor positions and complete it as a report.
The original statement of the issue follows:
- DIFFERENCES IN ESTIMATES: There are often large differences between an offeror’s proposed cost and the Government’s realistic or Most Probable Cost.
- GOVERNMENT & INDUSTRY: This task force will involve Government and Industry Cost experts to discuss/brainstorm possible reasons. (It may require discussing or mapping each others processes to determine where these disconnects may be.)
- IDENTIFY DISCONNECTS: Identify disconnects between offerors’ approaches in developing cost proposals and the Government’s approach to evaluating cost proposals (including performing realism analysis and developing Most Probable Cost)
- HELP RESOLVE DIFFERENCES DUE TO ANALYSIS DIFFERENCES: Minimize differences between the proposed cost and the Government’s Most Probable Cost that is due analysis approach differences (e.g., Government point estimate or a 50% probability approach vs. an offeror’s 10% best case approach.)
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Project Prediction Infographic
