The Pricing Review Procedure

The ability to project, analyze, and control problem costs requires coordination of pricing information and cooperation between the functional units and upper-level management. A typical company policy for cost analysis and review is shown in Figure 14-10. Corporate management may be required to initiate or authorize activities, if corporate/company resources are or may be strained by the program, if capital expenditures are required for new facilities or equipment, or simply if corporate approval is required for all projects in excess of a certain dollar amount.

Upper-level management, upon approval by the chief executive officer of the company, approves and authorizes the initiation of the project or program. The actual performance activities, however, do not begin until the director of program management selects a program manager and authorizes either the bid and proposal budget (if the program is competitive) or project planning funds.

The newly appointed program manager then selects this program's team. Team members, who are also members of the program office, may come from other programs, in which case the program manager may have to negotiate with other program managers and upper-level management to obtain these individuals. The members of the program office are normally support-type individuals. In order to obtain team members representing the functional departments, the program manager must negotiate directly with the functional managers. Functional team members may not be selected or assigned to the program until the actual work is contracted for. Many proposals, however, require that all functional team members be identified, in which case selection must be made during the proposal stage of a program.

The first responsibility of the program office (not necessarily including functional team members) is the development of the activity schedules and the work breakdown structure. The program office then provides work authorization for the functional units to price out the activities. The functional units then submit the labor hours, material costs, and justification, if required, to the pricing team member. The pricing team member is normally attached to the program office until the final costs are established, and becomes part of the negotiating team if the project is competitive.

Once the base case is formulated, the pricing team member, together with the other program office team members, performs perturbation analyses. These analyses are designed as systems approaches to problem-solving where alternatives are developed in order to respond to management's questions during the final review.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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