Original Date: 06/23/1997
Revision Date: 01/18/2007
Information : Cost Estimating Process
Cost estimating is a process by which costs to perform a specific task or job are determined. The cost estimating process used by the Directorate of Ammunition Operations (DAO) at Letterkenny Army Depot (LEAD) is based primarily on historical data derived from past jobs in lieu of the application of detailed time standards.
The DAO is responsible for disassembly, detonation, renovation, testing, and salvage of munitions. The majority of customers are Army, Navy, Air Force, and foreign military. Requests for cost estimates are received by telephone and are always followed with a memorandum. The memorandum provides the details of the work requirements such as product identification, description of work, quantities, and schedules. The requests are distributed to the appropriate production controllers for initial development of the cost estimate data and schedules. The production controller coordinates and schedules required meetings to identify, collect, and document man-hours, materials, and other cost data required by the cost center to perform the work.
For the past six years, historical data derived from past jobs was the primary source of data applied to the cost estimating process. Work measurement standards are no longer used because they are out of date, and it was determined they were too costly to develop and apply. Application and maintenance of work measurement standards require a large staff in a normal setting. In today’s setting, with the variety of workload requirements experienced by the DAO, the accuracy becomes questionable. With the automation of historical data, a variety of scenarios can be compared and estimates can be quickly developed with a high degree of accuracy at a much lower administrative cost than with the use of work measurement standards.
Along with historical data, the applicable organizations provide input. The production controller collects the input and documents these on the Standard Depot System Form 1055-R. This form includes the man-hours, material cost, schedule, and quantities. It is forwarded to the program analysts who apply the appropriate rates to compute the cost per unit and total cost. After the cost estimate is entered into the database for historical records and tracking control, it is forwarded to the appropriate personnel for approval before it is forwarded to the customer.
The cost estimating process based on historical data and organizational input has been a good trade-off in lieu of maintaining the costly work measurement standards. The database tracks the history of cost estimates and the jobs after they are completed, and provides easy access for developing estimates. The cost estimating process is being continuously refined by comparing the actual cost with the estimated cost contained in the historical database.
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