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Lessons learned since 1975

Processes & Best Practices

For Commercial Organizations

Model-Based Cost Engineering™ from Bid/No-Bid to Basis-of-Estimate

For Government Organizations

Expertise and research-driven costing technology for decision support

  • Basis-of-Estimate
  • Price-to-Win Estimates
  • Design-to-Cost Target
  • Ghosting the Competition
  • Bid / No-Bid Analysis

Leverage Historical Cost Data, Not Opinions

A Basis-of-Estimate (BOE) is an analyzed and carefully calculated number that can be used for proposals, bidding on government contracts, and executing a project with a fully calculated budget. It’s not just a simple calculation. It defines a specific number that can be used as a basis for project execution with complete confidence, enabling higher contract win rates.

The U.S. Department of Defense (DoD) alone awards 1,800 contracts daily, along with 36,000 delivery orders and task orders. Under the leadership of Ellen Lord, the Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L), the DoD is looking to “streamline, speed up, and reform the acquisition system,” relying heavily on data-driven results. To meet these goals, the DoD is pushing industrial contractors to leverage historical data to estimate costs rather than depending on the opinions of subject matter experts. This approach leverages historical cost data through cost analytics to estimate costs and produce bids. Meanwhile, contractors generating estimates based solely on expert opinion are becoming less credible to government review panels.

PRICE Cost Analytics™ generates data-driven BOEs using Model-Based Cost Engineering™ (MBCE™) capabilities offered in TruePlanning®, our unique integration framework. It allows you to configure and export your estimate into a BOE Report for customers (internal or external)—documenting all activities and resources percentage labor assigned, labor hours, and cost. All the data generates and displays your Activity Cost Estimation Relationship, your Cost Estimating Relationship (CER), and your sensitivity of the CER—using simple interfaces. Our solution is compatible with Microsoft® Excel® and can be implemented from the top down to standardize the way your various departments and locations generate and talk about estimates.

With PRICE Cost Analytics™, aeronautics, space, and defense organizations gain DoD- and government-approved BOEs for their bid and proposal process with more speed, accuracy, transparency, defensibility, and standardization.

Align Customer Affordability to Your Profitability

Today’s market environment demands that you improve your ability to win new business as well as continue to validate funding. A Price-to-Win (PTW) estimating capability empowers your organization to develop winning proposals with the right balance of capability versus price, compliant with your prospective customer’s requirements, and compatible with your costs. Without an estimation method that generates accurate and credible bids faster (or without the ability to accurately evaluate proposals and select the best vendor), the opportunity for success becomes less likely.

TruePlanning®, our unique integration framework in PRICE Cost Analytics™, offers integral Model-Based Cost Estimating™ (MBCE™) capabilities for an organization’s overall PTW process. Empowered organizations use MBCE™ to support the execution of a PTW bid strategy that effectively implements target costing—aligning products to customer affordability or market driven pricing to your profitability.

To win business, the organization must:

  • Know the customer’s budget
  • Understand the competitors bid
  • Know where your bid needs to be to win
  • Understand what winning at that price means

It can be challenging to determine the winning price that is competitive, achieve customer requirements, and be profitable. Discipline must be imposed upon the development process to attain the target cost.

There are four phases in PRICE Cost Analytics™ that can strengthen your PTW estimating capability, which include:

Discovery: A PTW strategy involves developing a customer view that defines what a prospective customer is willing to pay and what they intends to get for that amount. Typically, an empowered organization will take a “Ghosted” competitor view which is what the competition is likely to bid in terms of price and capability, and a “Capture” team view which involves developing multiple alternatives and comparing those with the other views to develop pricing options. Critical to this early process is the identification of specific customer product/performance requirements as well as technical characteristics of compliant offerings, both from your organization and possible competitors. At this point, using TruePlanning® will enable an organization to define and compare top-level structural views of offerings via its Product Breakdown Structure (PBS) capability. In addition, initial functional requirements can be captured by way of its unique input calculators and generators, which are data-driven based on industry-wide calibrations.

Data Generation: The PBS from the Discovery phase can be expanded to 2nd or 3rd levels. In addition, Estimators work with Engineering and SMEs to assess key cost-schedule drivers for the bidding organization and for its ghosted competition. These drivers can be articulated and quantified with the application of TruePlanning®’s proprietary “Calculator” based interface that, similar to TurboTax, allows the end-user to translate product/functional requirements into quantitative and qualitative modeling inputs, representative of:

  • Technology
  • Material and Process
  • Organizational Maturity and Productivity
  • Design/Development/Production Experience
  • Hardware Weight
  • Software Size
  • Manufacturing Complexity
  • Engineering Complexity
  • Integration Complexity

Of most significance during this phase is TruePlanning®’s unique feature that utilizes this collected data for organizational-specific “Calibration” of a defensible estimating capability. As follow-on PTW exercises are required, the organization now has a data-driven, repeatable, rapid estimating process. In addition, the TruePlanning® implementation serves as a standardized environment for the organization’s data collection, calibration, and subsequent estimations described below. This specific flexibility is very powerful for PTW strategies, whereas the organization can predict and manage costs to ensure profitability while meeting prospective customer requirements at a competitive price-point.

Of course, above and beyond reflecting customer and project requirements, TruePlanning® also allows incorporation of an organization’s unique labor, overhead, escalation, and other financial rates/ factors.

Similarly, the organization’s “Ghosted” view of the competition’s likely response can be reflected codified via TruePlanning®’s “Worksheet Set” capability. This flexibility allows for precise depiction of how business is conducted, how skill mixes are applied, how activities and resources are charged, how escalations are applied, how escalation and currency economic-conversions are applied, and well as other options. For both the organization baseline and the ghosted competitor views, these sets of rates/ factors allow for rapid customization at any level, from total program to individual subsystem.

Estimating: The most likely cost/schedule is produced to support the optimal PTW position. Initial inputs are complemented with additional assessments of system and project level drivers, as well as appropriate organizational-level calibrations. This estimate now reflects past performance, new financial/business factors, and a visualized understanding of the proposed project/product’s solution. Additionally, beyond this “most likely” position, alternatives can be readily analyzed via “What-if” scenarios to analyze alternative submissions and/or baseline deltas. TruePlanning® provides a sensitivity analyzer for every model input at every level, from total system to integrated subsystem to individual component. Further, TruePlanning® produces metrics giving visibility to implications of inputs and configurations—essentially projecting total ownership cost/ schedule dependencies on interpretation of requirements.

Reporting: TruePlanning® allows an organization to quickly analyze and adjust the baseline PTW cost position. It supports internal Microsoft® Excel®-based charting and graphics, as well as export to Excel, Microsoft® Project®, and other tools. Additionally, via a COM API interface, TruePlanning® can interact with risk analysis and engineering tradeoff tools, as well as PRICE-developed companion applications. The latter includes an Excel solution for large-scale manipulation (schedules, calibrations, etc.); a TrueMapper® application for the comparison/shredding between functional cost categories (say between the organizations and the customer’s); and a Sensitivity Analyzer for identification of cost/schedule input drivers, and their effect at any level of the estimate and PTW position. This reporting flexibility allows for insight into specific areas of competitive advantage/disadvantage as well as into implications, to the detailed product subsystem/activity/resource level, of requirements capture and position cost.

Design to What Customers will Pay

Targeting costing is a process where an organization conducts market analysis, determines the price a customer will pay, and designs a product or service around that price point, while predetermining your profit margins within an acceptable range. Past approaches focus on satisfying requirements with a new product or service. The organization then calculates the cost to develop and produce the product or provide the service, and finally determines a price that covers the cost and includes some level of profit.

Using PRICE Cost Analytics™, the price a customer must pay is a “consequence of design.” This approach is unique in several ways. First, the market is analyzed to find unfulfilled needs. The needs are translated into requirements. The organization conducts market analysis to determine what a customer would pay for the product or service that satisfies the requirement. Finally, the company designs and produces the product or service such that the cost and profit fall at or below what a customer would pay.

It is widely accepted that 80% to 90% of cost is determined at the design or development stage. Organizations have an opportunity to impact costs for not only development, but for production and even sustainment. However, it is important to manage these costs early on. Decisions in the development stage can render a project unaffordable over the life cycle. When the project is part of a larger portfolio of efforts, an unaffordable project could put the entire portfolio in jeopardy. Therefore, target costing should be part of an overall cost management strategy for the organization, not for a single effort.

TruePlanning®, our unique integration framework in PRICE Cost Analytics™, allows users to conduct rapid “What-if” scenarios and analyses of alternatives. Costs and labor requirements are readily available for every resource, activity, or cost object in the Product Breakdown Structure (PBS). Additionally, a series of metrics are automatically generated each time the model is calculated. The user can quickly determine whether to or not propose requirement additions or design changes negatively impacting the viability of a project.

Trade space is vital in target costing. A Program Manager may seek to increase the quantity of an end item by giving up some form of quality, or vice versa. TruePlanning® has a built-in sensitivity analyzer for every input in the model. Now, the Program Manager or Estimator can rapidly determine how a single input will impact overall cost at a system level, recurring cost at a component level, or at any level in between.

The ability to control key financial factors is important. Given the primary goal of target costing is to meet a requirement while maintaining a certain level of profitability, the organization needs to ensure this level of profitability is controlled in the estimate. Financial factors are available for every resource in the framework. The user can easily input or modify financial factors such as labor rates, fee or profit, hours worked, escalation, overhead, over time, and general / administrative costs. By ensuring the estimate includes the required level of profitability, the Estimator can fully understand the trade space available in order to meet the requirement within the market price point.

Requirements, cost, and profitability are all key considerations. Scheduling is just as important. In fact, scheduling is so intertwined in cost that the two go hand-in-hand. TruePlanning® can assist the Estimator in generating an optimized schedule for the project. They have full control over start and end dates for every activity in the framework. Additionally, TruePlanning® interfaces with Microsoft® Project®. A TruePlanning® project can be exported to Microsoft Project, dates can be adjusted, and the project can be sent back to TruePlanning® to determine the cost implications of any schedule change. As the saying goes, “Time is money.” Cost and schedule are not severable, particularly in a target costing environment.

Gain Picture of Competitor’s Cost and Schedule

Ghosting the Competition provides an objective assessment of the competitor’s offerings. It is usually a multi-functional activity that involves Capture Management, Business Development, Engineering, and Cost Estimating organizations. This is done for two reasons. First, to learn about weaknesses that could serve as differentiators during the proposal process. Second, to make an assessment about the competitors most likely bid. Once completed, a cross-walk between the competitors most likely bid and your organization’s current bid often reveals competitive advantages that can be leveraged during proposal preparation or to minimize competitive disadvantages.

There are four phases in conducting this study in PRICE Cost Analytics™, which include:

Discovery: Business Development and Capture Management organizations unite to determine the main competitors and develop an overview of their most likely offering. This may include Business Intelligence (BI) activities to gather information from past performance and available cost history. Once the most likely competitive offerings are established, technical characteristics of the competitor’s offering (top-level performance parameters) are developed by Engineering.

Data Generation: Several key competitor artifacts are generated based on the assessments in the Discovery phase. The Engineering team develops a Product Breakdown Structure (PBS) of the competitors offering, usually to the 2nd level. In addition, the Engineering team assessments are made on representative technology and design, weight statements (matching the PBS), and material/manufacturing processes. Concurrently, Program Management and/or Engineering provide estimates of the competitor’s achievable schedule, organizational profile/maturity, and design/manufacturing team experience. Lastly, Finance provides an assessment of the competitor’s most likely direct labor rates, overheads, and other financial factors.

Estimating: The ghosting estimates utilize all the information gleaned in the Data Generation phase to develop a complete picture of the competitor’s most likely offering of cost and schedule. TruePlanning®, our unique integration framework in PRICE Cost Analytics™, constructs a PBS representative of the competitors offering and consistent with existing data. Using ethical BI methods, actual cost history from the competitors past programs is gathered and calibrated to produce the key inputs for Manufacturing Complexity of Structure and Electronics, as well as other key inputs. After the PBS is constructed and calibration complete, the remainder of the technical inputs are populated in TruePlanning®. Working in conjunction with a cross functional team of SMEs, the following key items are discussed, and key input values are derived:

  • Organizational footprint (productivity)
  • Most likely schedule
  • Most likely direct rates and factors/profit/overhead
  • System level complexities (management team/project complexity/requirements stability)
  • Manufacturing process and team experience
  • Software development environment and team experience
  • Integration complexities

Based on the above, the modeling of the competitor’s offering is completed in TruePlanning® and the resultant estimates reflect the most likely cost and schedule. The estimates also consider the competitor’s past performance, adjustments for current realities (rates/overheads/team experience), and technical solution.

Cross-Walk & Reporting: During this phase, TruePlanning® is used to develop a detailed view of the competitor’s estimate. Because TruePlanning® is based on Activity Based Costing, estimates can be viewed at all levels down to the activity and resource. In addition, using our Microsoft® Excel® Companion Sensitivity Analyzer, identification of the competitor’s top cost and technology drivers are possible. Finally, a cross-walk between the competitor’s offerings is performed using our TrueMapper® application. The mapping can take place either to the current PBS or Work Breakdown Structure (WBS). This allows for a complete functional comparison down to the activity/resource level if required. The result of the cross-walk highlights specific areas of competitive advantage/disadvantage and provides the Capture Manager with insight needed to provide the most competitive solution at the lowest cost.

Make Critical Decisions Faster, with Confidence

Bid/No-bid decisions depend upon Rough Order of Magnitude (ROM) estimates which accurately reflect a company’s internal costs to perform. Many companies do not have a standardized approach to these estimates, so they reinvent the approach every time. This is inefficient; it wastes time and fails to build confidence in the process. Magnifying the challenge, most companies have not systematically harnessed their internal cost data making access to available data difficult to leverage. Typically, ROMs do not leverage performance metrics of past or ongoing projects, nor can they be easily compared to the competition. With limited time and shrinking budgets to make these key bid/no-bid decisions, fewer options can be considered, and estimates are often unrealistic—destroying the organization’s credibility that can result in missed opportunities and even worse, unprofitable wins.

By implementing PRICE Cost Analytics™ and its Model-Based Cost Engineering™ (MBCE™) capabilities, companies can produce credible, data-driven ROMs that empower decision-makers with real metrics and competitive information so that they can pursue profitable business or walk-away with confidence.

Estimators quickly leverage statistics and cost metrics from their internal cost databases to prepare true and accurate “Should Costs.” Standardization and maturity of the process facilitates rapid “What-if” exercises to be performed to consider numerous alternatives.

Strategic metrics like unit production or cost per operational hour, as well as knowledge embedded in our supervised, predictive models enable you to swiftly establish confidence boundaries around competitive offerings, including Not-to-exceed (NTE) and Not-less-than (NLT) estimates. PRICE® helps its customers win profitable business and avoid unnecessary risk by leveraging data, information, and knowledge to proceed with confidence.

  • Budgeting and Planning
  • Investment / Acquisition Decisions
  • Program Management
  • Business Case / Alternatives
  • Research & Data Analysis

Quickly Develop Accurate, Executable Budgets

Build budgeting confidence by leveraging our fast, proven, and data-driven solutions. Benefit from our continuous PRICE Cost Research® in the form of supervised models, pre-generated templates and test cases, and easy-to-use interfaces. Rely on PRICE Cost Analytics™ to help ask the right questions, to understand the cost of requirements, and to develop estimates covering the entire lifecycle of programs and projects.

Rapidly respond to what-if drills, with changes to requirements and associated solutions reflected instantly in results. Easily map and align results into standard and organization-specific budget forms and exhibits to support the federal planning, programming, and budgeting process.

Make Data-Driven Program Decisions

Successfully and confidently advance programs and projects through key decision points, milestone reviews, and other important programmatic events with PRICE Cost Analytics™ . Quickly develop defendable data-driven solutions for Program Office Estimates, Should-Cost analyses, Independent Cost Estimates, Independent Government Cost Estimates, and government affordability analyses.

Whether it is space, air, land, or sea systems, unmanned technologies, or federal business systems, our full lifecycle estimating solutions supply users with Predictive Power® for cost, schedule and risk analyses. Based on extensive research and data analytics, PRICE Cost Analytics™ empowers stakeholders with information at the system, subsystem, assembly, activity and resource levels, all within a powerful, structured framework to ensure ease-of-use to generate complete and realistic estimates.

Efficiently Control Projects in a Single View

Plan, manage, monitor, and control projects using the PRICE Cost Analytic™ TruePlanning® Framework. Integrate cost, schedule, and technical together to improve project execution and outcomes. Establish realistic performance measurement baselines, then reflect changes throughout execution with fast, easy-to-use forecasting models. Quantify the impact of technical, programmatic, cost and schedule data uncertainty as a contributor to risk. Measure key attributes and success over time with built-in charts, reports and metrics capabilities.

Incorporate organizational and project results as they occur through powerful, automated calibration. Quickly generate new project completion estimates driven by actual performance, resulting in more effectively baseline planning, management and control.

Identify the Optimal Alternative, in Real-Time

PRICE Cost Analytics™ enables business case analysis and other trade-off analyses by giving decision makers an accurate frame of reference for comparing the cost, schedule, and risk of competing alternatives. Users can generate cost trade-off values and conduct present value economic analysis to identify not only the most affordable resource requirements for the project, but also the best value for the overall investment.

Our robust and flexible solutions deliver real-time results, with updates for changes or new alternatives reflected instantly. Rapidly understand and communicate different combinations of technologies, materials, sources, and acquisition, procurement, and sustainment strategies. Our models, grounded in engineering principles, support Analysis of Alternatives, Trade Studies, Business Case Analyses, Cost-Benefit Analysis, engineering trades, design-to-cost, and risk reduction and technology maturation efforts, to name a few.

Leverage Research, Analysis, and Enhanced Data

The Predictive Power® and explainability of our cost and schedule estimating solutions are driven by a dedicated team of fulltime researchers and data analysts. PRICE® Research develops defendable, predictive models based on historical public, private and commercially sold data. Our customers also become our partners, sharing valuable historical data to support calibration, testing and validation of PRICE® models and algorithms.

PRICE® Research continuously investigates emerging industry trends and technologies, incorporating new research and findings into our models. Many of our customers rely on us to provide predictive solutions for leading edge missions and technologies. Our Resource Library provides the team’s thought leadership papers and presentations in a variety of venues, such as online (e.g., blogs, webinars, etc.), conferences, workshops, and communities of practice.

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