Costing Exercises and Demonstrations

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Costing Exercises and Demonstrations

• Ken Young
• PFG
• Land and Maritime

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Exercises for over lunch

• Exercise Sheet being handed out
• Props are at the back of the room
• Answers and Discussion after Lunch

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Area of the room.
Area L X B
B
Could measure dimensions with a long tape Can
use a comparison carpet tiles, tables etc Could
Guess (SWAG)
L
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Price of a box of Goldscrews
Parametrics Relationship between cost and
physical parameters Rough Regression in
your head Can use Excel






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Volume vs cost R2 0.962
Length by diameter product vs cost R2 0.941
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Equations

• Price 0.00274(Volume) 0.274
• Price 0.0106(length x diameter) 0.009

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Confidence Limits
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A Real Example
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Lamps WLC

• Price 0.30 3.99
• Life 1000hrs 10000hrs
• Cost per 10khrs 3.00 3.99
• Consumption 100w 20w
• Cost for 10k_at_8p 80 16
• labour to replace 100 10
• WLC for 10,000hrs 183 30

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Lamp WLC

• Initial purchase filament lamp X10 cheaper
• WLC Energy saver is X6 cheaper
• 10000 hours is about 4 years in an office lighted
  all day
• In a domestic situation boundary would be before
  replacement labour

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Bathroom Refit

• What is to be refitted appliances, tiles, lights,
  flooring, etc What quality will be used
  (600-2500)
• How will job be done all DIY, some sub con
  labour, whole job from specialist (0-5k)
• How Long... Beware time available becomes the
  estimate
• MDAL !

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Demonstrations of Models

• Front End (FACET)
• Trading in design Phase(DA/PFG)
• Detail Pricing / Bidding(Price Build)

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Price Build
Production Manhours Scrap and rectification Learne
r Labour rate Sub Total Production
Overhead Materials Sub Contract Bought out
Finished Handling Overhead Sub Total G A
Overhead escalation ProfitPrice
Data can be collected against most of
these headings. Rates will be separately
negotiated. Can be built bottom up Time consuming
and expensive
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Pricing and Forecasting Group MISSION To
enable our customers to achieve value for money

• A mix of professional accountants, cost engineers
  and support staff 470 staff
• Services include

• Cost Forecasting
• Pricing
• AAC
• PPP/PFI

• EVM
• Risk Analysis
• Assurance
• Consultancy

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• In 2003, PFG conducted over 225 pricing
  investigations.
• Visited nearly 250 Defence contractors or
  subsidiaries
• Savings of around 14 (158M in 1180M of
  Non-Competitive Contracts in 2003/04)
• Supported all the major IPTs with cost
  forecasting, risk analysis and EVM services
• AAC investigations recovered costs in 2003/2004
  amounting to 1.23M in GFE Assets
• Studies into software, KSM, company viability,
  industry capacity etc.

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What does PFG/CF deliver?

• Whole Life Costings
• Cost Risk Analysis
• The costing elements in
• Financial Appraisals (Can we afford it)
• Economic Appraisals (Value for money)
• Whole Life Cost Models
• Public Sector Comparator costings
• Advice and consultancy

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How to task Cost Forecasters

• What needs costing
• For what purpose
• Out to what boundary
• By When
• To what Fidelity / Accuracy
• Option Set
• MDAL