Developing the Supporting Backup Costs

Not all cost proposals require backup support, but for those that do, the backup support should be developed along with the pricing. Extreme caution must be exercised to make sure that the itemized prices are compatible with the supporting data. Government pricing requirements are a special case.

Most supporting data come from external (subcontractor or outside vendor) quotes. Internal data must be based on historical data, and these historical data must be updated continually as each new project is completed. The supporting data should be traceable by itemized charge numbers.

Customers may wish to audit the cost proposal. In this case, the starting point might be with the supporting data. It is not uncommon on sole-source proposals to have the supporting data audited before the final cost proposal is submitted to the customer.

Not all cost proposals require supporting data; the determining factor is usually the type of contract. On a fixed-price effort, the customer may not have the right to audit your books. However, for a cost-reimbursable package, your costs are an open book, and the customer usually compares your exact costs to those of the backup support.

Most companies usually have a choice of more than one estimate to be used for backup support. In deciding which estimate to use, consideration must be given to the possibility of follow-on work:

• If your actual costs grossly exceed your backup support estimates, you may lose credibility for follow-on work.

• If your actual costs are less than the backup costs, you must use the new actual costs on follow-on efforts.

The moral here is that backup support costs provide future credibility. If you table 14—8. operations skills matrix

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TABLE 14-9. CONTRACTOR'S MANPOWER AVAILABILITY

Number of Personnel

Total Current Staff

Available for This Project and Other New Work 1/93 Permanent + Agency

Process engineers

Project managers/engineers

Cost estimating

Cost control

Scheduling/scheduling control

Procurement/ purchasing

Inspection

Expediting

Home office construction management

Piping

Electrical

Instrumentation

Vessels/exchangers

Civil/structural

Other

Permanent Employees

79 42 73

42 40 33

90 31 19 24 30 13

Agency Personnel

51 21

20 20 18

19 23 8

Anticipated Growth by 1/93

Permanent +

Agency

have well-documented, "livable" cost estimates, then you may wish to include them in the cost proposal even if they are not required.

Since both direct and indirect costs may be negotiated separately as part of a contract, supporting data such as those in Tables 14-8 through 14-11 and Figure 14-12 may be necessary to justify any costs that may differ from company (or customer-approved) standards.

TABLE 14-10. STAFF TURNOVER DATA

For Twelve-Month Period 1/1/92 to 1/1/93 Number Terminated Number Hired

Process engineers

5

2

Project managers/engineers

1

1

Cost estimating

1

2

Cost control

12

16

Scheduling/scheduling control

2

5

Procurement/purchasing

13

Expediting 4 5

Home office construction management 0 0

Design and drafting—total 37 29

Engineering specialists—total 26 45

Total 119 118

TABLE 14-11. STAFF EXPERIENCE PROFILE

Number of Years' Employment with Contractor

TABLE 14-11. STAFF EXPERIENCE PROFILE

0-1

1-2

2-3

3-5

5 or more

Process engineers

2

4

15

11

18

Project managers/engineers

1

2

5

11

8

Cost estimating

0

4

1

5

7

Cost control

5

9

4

7

12

Scheduling and scheduling control

2

2

1

3

6

Procurement/purchasing

4

12

13

2

8

Inspection

1

2

6

14

8

Expediting

6

9

4

2

3

Piping

9

6

46

31

22

Electrical

17

6

18

12

17

Instrumentation

8

8

12

13

12

Mechanical

2

5

13

27

19

Civil/structural

4

8

19

23

16

Environmental control

0

1

1

3

7

Engineering specialists

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3

16

21

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180

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Figure 14-12. Total reimbursable manpower.

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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