by Melissa Winter
| September 25, 2014
These days bidding can be a game, and contractor leadership is constantly making decisions on whether to take on risk in order to stay competitive or to bid conservatively for the safety of not overrunning.
You may complete a cost model for a program, and spend time analyzing the uncertainties behind each input and in the end find that your estimate lands at the 30% confidence level. After some strategic analysis, the bid leadership team decides, we would like to bid at the 80% Confidence level, “please present your estimate to support that total”. In this case, you are basically being asked to adjust the estimate (in a justifiable manner) in order to meet the more conservative estimate. It may not be as easy as it sounds. Some models are not necessarily designed to work backwards in that way, but there are a few different ways you could approach it…
1. Calibrate to the new risk averse values
2. Adjust the estimate by applying multipliers to activities
3. Adjust the estimate via the mapping process (essentially using multipliers external to the model)
If you build your model In TruePlanning, there is no automatic way to flip all of the cost breakdowns to the 80% Confidence Level. However, you could adjust the whole model to match that total value by calibrating each cost object to this target cost (the 80% level). If calibrating a software object, you may tune “Organizational Productivity” to give you the desired output, basically inflating the estimate to the more conservative value. A slightly lower productivity is definitely a possible risk. At the system level, you could tune “System Complexity” to add weight to the project oversight.
If you don’t want to adjust inputs, you could consider adjusting the multipliers for some activities, especially those that seem to be risky. Afraid you may have some slow-downs in development due to some new, state-of-the art designs? Add 5% to the Development Engineering Activity to support that possible delay.
You may decide that the model is your point estimate, and it should not be perturbed. In this case, you might use a tool like the Viewer/Mapper to essentially apply multipliers to the estimate in an external manner, in the process of mapping your TruePlanning Product Breakdown Structure to the Program’s Work Breakdown Structure (which you were probably going to do anyway). Add 10% onto the “Tooling and Test” activity for every cost object, or add 30% just for super-tricky new Electro-Optical Sensor.
Whichever method you choose, try to track justifiable reasons for each adjustment. Maybe even try to align the moves to your risk mitigation plan. Remember, traceability is key, and eventually someone will come back and ask, “Why?”.