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Cost Estimation for Risk: Are Contractors Really Overpricing?
In a May 2023 report, CBS News uncovered repeated instances of defense contractors overcharging the Department of Defense (DoD). DoD would often negotiate fixed-price contracts with a reasonable 12% – 15% profit, but Pentagon analysts would later discover overcharges that boosted profit to 40% or more.
On May 24, 2023, five US Senators directed the DoD to investigate these findings in a letter to the Secretary of Defense. They noted that almost half of the FY 2024 budget “will go to private contractors, underlining the importance of reining in this out-of-control price gouging.” The senators linked the overcharging to the long-standing issue of the DoD’s inability to accurately audit their finances, leaving them vulnerable to the significant fraud reported by CBS.
Predictive Analytic Approaches for Estimating the Life Cycle Cost of Agile Programs
The transition to agile management approaches for Software development has introduced even more
challenges for cost estimating teams, especially as they support long-term budget development and
program execution. Learn about how Unison Cost Engineering is internalizing an agile program into
TruePlanning.
Carrot or Stick? If it were only that simple
One of the debates that the PACE Directors, including me, have is whether to nudge and persuade cost engineers, CFOs and accountants to adopt progressive management accounting methods with a carrot or a stick.
VOLUME VOLUME VOLUME
I recently participated in an online discussion on LinkedIn as to the impact of volume on cost. To be honest, this is one of my favorites, although controversial topics.
A LinkedIn user was listing all the typical cost drivers for a product, material, overhead, burden profit and of course, volume. I took and still take exception to volume being a cost driver. It often becomes a price driver, but I will get into that shortly.
The first thing that needs to be understood is, are you looking at cost from the perspective of a seller or buyer? There is a significant difference.
The Long Arc Bends Toward Justice
Martin Luther King, Jr. said that “the arc of history is long, but it bends toward justice.” The origin of this sentence can be traced to Theodore Parker who was a Unitarian minister and prominent American Transcendentalist born in 1810. Parker called for the abolition of slavery in the USA in an 1853 collection of “Ten Sermons of Religion”.
So, what does this have to do with mission of the Society of Cost Engineers (SOCE)? Plenty.
Repeatability vs Flexibility
The question I pose to the readers is, given the definitions of SHOULD COST, REPAETABILITY and FLEXABILITY, do you prefer a solution that has repeatability or flexibility? Is it more important to you to have the same answer regardless of who conducted the estimate or to give each estimator the ability to tweak each model to their own liking?