basis of estimate processes

BOE TRAINING

Developing a Basis of Estimate is an art and a science

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Why High Quality BoE’s?

Minimizes negotiation losses from contract award

through close out.

Ensures credible and defensible BoE’s that pass the

rigor of government audit.

Demonstrates integrity of our work to our

customers.

The contract process requires Estimators and

Functional Managers to sign a contractual

instrument during the estimation process and that

is the BoE.

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Roles And Responsibilities for BoE’s

Program Manager has overall responsibility to

ensure that estimators prepare BoE’s that meet

expectations and with sufficient quality that

Defines preparation schedule

Coordinates resource assignments

Ensures consistency in preparation and compliance with

RFP, SOW and other internal/external requirements

Adheres to the proposal process

Post award, Program Manager has overall

responsibility for BoE’s used in CFSR.

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Roles And Responsibilities For BoE’s

Estimator prepares resource estimate that

Documents BoE in BoE template

Mobilizes other resources (i.e. MC, Procurement) in data gathering requirements

Ensures TINA training is taken and BoE’s meet TINA expectations

Functional Manager reviews and approves BoE for TINA compliance, ensures that the resource estimate and BoE is consistent with technical approach

Lead Pricer/Pricing Analyst includes BoE document in cost volume, ensures that a BoE exists for all resource estimates and that BoE is consistent with other estimating documents received for price preparation

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Common Defects in the BoE Process

BoE’s for some estimates simply don’t exist

Either a lack of process knowledge or pure disregard

Large proportion of BoE rationale documented as

Engineering Judgment or Experience

Missing description of thought process or methodologies

and insufficient breakdown of hours

Reference to historical actuals with no supporting

documentation

Numbers do not agree. Math doesn’t add up.

Descriptions do not reflect the full scope of the BoE

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Methods Of Estimating

Risk Level defined here as the degree to which actual costs which will be

incurred will vary from the estimate

Recommended Use Of Experience / Judgment 25%

Estimating Technique Risk Level

Historical Data/Vendor Quotes/Catalog Costs Very Low

Comparative Analysis Low to Medium

Level of Effort Medium

Parametric Estimates/Cost Modeling Medium to High

Engineering Estimates High

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Example BoE’s

BoE Source Material Evidence Consequences

Citing

Actuals

We’ve done this before on a

similar program and will do the

same or similar in the future.

Traceable costs and

duration from prior

work

Attached

Actuals

We’ve done this in this program

in the past and will continue to

do the same or similar work in

the future.

Repeatable cost

absorption

Engineering

Judgment

We’ve got an idea of what to

do and how much it costs and

the resources.

Large variance

possibilities even

though experience

indicates otherwise

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Assumptions In The BoE

The Assumption section of the BoE must always be filled–in.

For rudimentary BoE’s that are self–evident write “No Assumptions for this BoE” The reason this section must be filled in is it demonstrates

that you thought about it and considered it

A filled in Assumption section adds to your credibility

Example: This assumes that the monitoring clause, similar to the other

programs, will find the reporting stopped at the first sub tier level. Reporting beyond that level would likely result in more effort as well as added costs from the suppliers. In addition, scope exceeding the first sub tier could result in some of the suppliers choosing to no bid or refuse the orders.

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Managers & Estimators Must Look For

All sections of the BoE worksheet must be filled–in

Non–recurring (NRE) is estimated separately from Recurring (RE)

Numbers/math and period of performance agree across the BoE

Scope of the task/s are covered

Basis of Estimate uses either Historical data, Comparison, LOE,

Parametric or Experience/Judgment

Use Experience/Judgment sparingly

Derivation Of Hours itemizes specific tasks to 40 to 200 hour

chunks if historical data/actuals are not used

Ensure any attachments are present and cross referenced by its

title in the BoE

Ensure sufficient reasoning to correlate basis to the hours/dollars

requested from the perspective of someone unfamiliar with the

work in your functional area

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BoE Checklist

Review kickoff package to ensure scope is

contained in the appropriate BoE

Complete rationale

Check your math

Ensure that Basis of Estimate uses Historical Actuals,

parametric data, Work

Standards, Improvement Curves, Calculations,

Extrapolation or Judgment coupled with prior

experience on similar tasks.

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BoE Checklist (cont.)

Derivation of hours is detailed and math sums

correctly

Identify assumptions that affect cost and schedule

Add Risks and Opportunities under Risk tab

Major Do’s and Don’ts

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BoE Checklist – Major Do’s

Rationale must have clear and concise documentation in support of the estimate.

Spread hours by year and month.

Use actuals or historical data as a basis of estimate when appropriate.

If actuals are being used as a part of the quote, make sure they are included in the proposal submittal.

Always document your assumptions.

Set the parameters for which your estimates are valid for.

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BoE Checklist – Major Do Not’s

Say you used actuals when you don’t have actuals

to support your estimate.

Do a cost estimate that you don’t know the

scope. Ask for clarification.

One Checklist Per Grouping of BoEs.

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BoE Checklist

All sections are filled–in

Non–recurring (NRE) is estimated separately from Recurring (RE)

Numbers/math and period of performance agree across the BoE

Scope of all tasks is adequately covered

Basis of Estimate uses either Historical data, Comparison, LOE, Parametric or Experience/Judgment

Derivation Of Hours itemizes specific tasks to 40 to 200 hour chunks if historical data/actuals is not used

Ensure any attachments are present and cross referenced by its title in the BoE

Ensure sufficient reasoning to correlate basis to the hours/dollars requested from the perspective of someone unfamiliar with the work in your functional area

Assure assumptions are listed or reason stated for “No Assumptions”

Period of Performance is accurate on every BoE sheet

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BoE Checklist

BoE content and criteria is checked and verified by

AVI BioPharma BoE Audit Team

Errors and issues are sent back for the inputs to be

corrected and the Functional manager to verify

and sign off corrections

BoE Metric tool is used for checking accuracy of

BoEs

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BoE Audit

The BoEs will be audited prior to our submission to

our customer

Deficiencies will be returned to the author for

corrections

ALL BoEs should be reviewed and approved by a

functional or department manager prior to the

audit process

All BoEs will be audited to the following 9 criteria

You are Responsible for Compliant BoEs

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9 Criteria for Good BoE Audit

1. Clear Description of What is Being Estimated

Specific reference is made to the origin of work

requirements (e.g. customer or internal SOW

document and paragraph, CLIN #, etc.), along with a

summary as it pertains to the BoE scope of work.

A clear description of the scope of work included; task

description of work clearly illustrates knowledge of

task at hand.

Recurring and non–recurring costs are segregated

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2. Source Data is Valid and Recoverable

Historical Data – the most current data is used; data is uniquely identified and dated; scope of work reflected by historical data is identified and historical data is included as directed.

Vendor/supplier quotes are valid (valid dates, clear identification of part number, quantity, pricing, provided by a supplier legal representative).

Any cost models used are adequately supported with current historical data, have been tested good, have adequate documentation, have been approved by engineering management for use.

All data is appropriately archived and available for detailed review or auditing.

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3. Estimate Rationale is Logical, Complete, and

Reasonable

Logic can be easily followed.

If using historical data, comparative analysis included

for

similarities and differences of all significant aspects;

analysis is objective wherever possible.

Summary description given of Estimating Method(s) /

Technique(s) used and why they were used.

If using judgment, explanation included of why

historical data is not available.

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4. Estimate is Tied to a Period of Performance

Estimate includes adequate information to be able to

spread the cost over time.

Agrees with schedule for when the estimated work will

be performed.

Total resources spread for task match calculation

totals.

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5. Calculations are Accurate

Calculations are in logical order and are explicit.

No math errors.

Units are clear.

Subtotals entered as appropriate.

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Travel not part of BoEs.

6. Material and Supplier Services Bill Of Material (BOM) is Included

BOM is provided, organized, and has all required information including quantity factors, analyses.

Supplier quotes included when necessary.

7. Estimate Totals are Clear, Identify Specific Resource Types

Totals are provided in proper location of BoE.

Totals are provided by specific resource types and by site ERP resource code

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8. Complete, Organized, Traceable and Presentable BoE is completed as required.

WBS used to organize estimates/BoEs;

BoE is organized in a logical flow; references

to other BoE areas can be easily found.

Summary information is traceable to supporting information.

One WBS to one BoE; BoE can have multiple SOW references.

Spelling and grammar is correct.

Information is not left out; no redundant or extra data added.

Proper BoE format used.

No embedded files.

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9. BoE has Functional Approval

Appropriate review and approval obtained.

A "yes" here indicates that, for the FPY Review, BoEs

have been "Reviewed" by a cognizant functional

manager and deemed to meet the BoE Criteria. This

is a requirement for entry into the FPY Review.

Subsequent "Approval" of all final BoE artifacts by a

functional director or delegate is required prior to

submittal. The approval indicates that BoEs are

complete, the BoE Criteria are met, and that BoEs are

ready for submission in the proposal.

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BoE Audit Reiterated

The BoEs will be audited prior to our submission to

our customer

Deficiencies will be returned to the author for

corrections

ALL BoEs should be reviewed and approved by a

functional or department manager prior to the

audit process

All BoEs will be audited to the above 9 criteria

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basis of estimate processes

Technology