2006 PRICE INSight
"Should-Cost" Program Soars with PRICE Parametric Estimating
The Defense Supply Center Richmond—Value Engineering Branch C (DSCR-VEC) is an office of the Defense Logistics Agency that manages the Should-Cost Program in Richmond, Virginia. The goal of the program is to give government buyers an independent "should-cost" estimate with which to assess quotes received from contractors.
DSCR had ongoing value engineering programs to improve its ability to produce cost information in a timely manner, but their should-cost process was difficult to perform, labor intensive, and full of uncertainty. Many requests could not be completed until after contract award, thereby depriving customers with assistance for cost-effective procurements.
Among steps DSCR took to improve its should-cost process was development of historical databases that compiled item-related data such as technical characteristics, previous procurement data, item availability, competing contractors, etc. While helpful, the time to analyze a contractor's proposal against the databases was still too long to always be effective.
Dramatic Improvements with PRICE Tools
In 2006, the DSCR integrated PRICE parametric modeling tools with their databases. With the PRICE software, accurate Should-Costs Analyses could be delivered much more rapidly with minimal technical input and much less labor to provide the service. The average case response time (turnaround time) has been reduced from 93.5 days in 2005 to 17.1 days in 2006 using PRICE models. In the first half of fiscal year 2006, DSCR-VEC received 144 cases as pending buys compared to 146 for all of 2005, signaling that customers are responding favorably to the improved service.
Immediate and Long-Term Benefits
At a time when contracting officers and program managers are pressured to ensure that costs charged to the government are the best prices possible, the Should-Cost Program at DSCR now reliably provides a highly effective method for preparing a negotiating position not previously available. This empowers every DSCR customer to be more effective with their procurement processes.
Using PRICE tools backed by PRICE System's continuous investments in its parametric estimating technology over a 30-year period has also increased the confidence in cost estimates and perceived value of service that DSCR can now provide. Not only can customers count on a timely response, but can rely on accurate estimates that are well documented, allowing for credible assessments before negotiating with contractors.
In recent years, DSCR had added extensive labor support in its attempts to reduce turnaround times and increase accuracies of its should-cost analyses. In 2006 and future years, using PRICE tools, these extra resources will draw down dramatically, resulting in cost reductions of approximately $1 million annually to provide a better should-cost service.
Emerging Center of Excellence
DSCR, who now is standardizing on the PRICE-driven approach to Should-Cost Analyses, is currently planning to share its new solution with other DLA offices, convinced that it should be used throughout DLA and other government agencies. As the first to apply parametric estimating for support equipment purchases—versus its prevalent use in large DoD weapons systems programs—DSCR is positioned to become a Center of Excellence for Should-Cost Analysis in government.
The collaborative effort between DSCR and PRICE, in a very short time, is already gaining recognition, having been nominated for a 2006 Federal Computer Week Pioneer Award.
