APMP Government/Industry Cost Analysis Task Force

APMP Government/Industry Cost Analysis Task Force

Update showing history, charter, and actions

November 2011

“Knowledge is Power”June 9-12, 2009, Chandler, AZ Successful Capture Strategy: The Art of Winning Bruce

Morton2

Task Force Background & Status

• Background – Formed following 2008 APMP conference– Focused on how the industry prepares

and the government reviews and evaluates cost proposals

– Sought individuals from both government and industry who support the cost efforts

“Knowledge is Power”June 9-12, 2009, Chandler, AZ

Taskforce going since 2008

• Let by Christie Webb 2009• Led by Quintin Redmond 2010 & 2011• Led by Dan Galorath 2012

Successful Capture Strategy: The Art of Winning Bruce Morton

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Statement of the Issue (Original)

• DIFFERENCES IN ESTIMATES: There are often large differences between an offeror's proposed cost and the Government's realistic or Most Probable Cost.

• GOVERNMENT & INDUSTRY: This task force will involve Government and Industry Cost experts to discuss/brainstorm possible reasons.

• It may require discussing or mapping each other's processes to determine where these disconnects may be.


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Goal of the Task Force Effort (Original)

• IDENTIFY DISCONNECTS: Identify disconnects between offerors’ approaches in developing cost proposals and the Government's approach to evaluating cost proposals (including performing realism analysis and developing Most Probable Cost)

• HELP RESOLVE DIFFERENCES DUE TO ANALYSIS DIFFERENCES: Minimize differences between the proposed cost and the Government's Most Probable Cost that is due analysis approach differences (e.g., Government point estimate or a 50% probability approach vs. an offeror’s 10% best case approach.)


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What is the benefit to the APMP?

• Cost Analysis is always an important part of RFP preparation and proposal writing

• It is an art that is not well understood from both sides.

• Having a better understanding of what each side does and why will improve acquisitions

• Both Industry and Government Membership can utilize this information to better train, prepare, or educate personnel in their respective organizations that are supporting acquisition efforts


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Steps 2009

• Complete Steps 3 and 4 of the 4-Step Process1. Clarify2. Define3. Price4. Substantiate

• Probe further into causes for differences between Industry proposed costs and Government evaluated most probable costs – Understand differences in the approaches behind

developing Industry cost proposals and performing Government cost evaluations

– Identify contradictory assumptions

• Provide perspective and dialogue on cost proposals:– IDENTIFY DISCONNECTS between offerors’ approaches in

developing cost proposals and the Government’s approach to evaluating cost proposals

– IDENTIFY ASSUMPTION ISSUES: Identify contradictory assumptions that drive the disconnects between Industry proposed costs and the Government Most Probable Costs

– NETWORKING: Provide networking opportunities with Government and Industry professionals

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• Examination of Government RFP cost proposal instructions and Industry responses– Identify disconnects– Identify possible solutions

• Recommend changes or improvements to facilitate better Government/Industry interaction on Cost Proposals

• Deliver a written report and presentation that summarizes the analysis findings and recommendations

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4-Step Process to Analyze

1. Clarify– Government and industry need to understand request

and submittal requirements

2. Define– Industry needs to ensure that cost development team

understands what is needed for submission. – Government needs to ensure that cost evaluation team

understands what will be submitted and how to review it.

3. Price– Industry develops pricing. Government prepares internal

estimate.

4. Substantiate– Industry and Government should provide detailed

assumptions to support costs


• Document delivered in 2010 with government / industry questions & answers


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21st Annual APMP® International Conference & Exhibits

2010 APMP Cost Analysis Task Force Panel“The Good, The Bad, The Ugly – Bid Process”

THE UGLY THE BADTHE GOOD


APMP Cost Task Force PanelAPMP Cost Task Force Panel“THE GOOD, THE BAD, THE UGLY – BID “THE GOOD, THE BAD, THE UGLY – BID

PROCESS”PROCESS”

PANEL PANEL Quentin Redman – Moderator (Raytheon)Quentin Redman – Moderator (Raytheon)

Jean Goolsby – ITTJean Goolsby – ITTDan Galorath – Galorath, Inc.Dan Galorath – Galorath, Inc.

Monica Smith – NAVAIRMonica Smith – NAVAIRBruce Morton – Lockheed MartinBruce Morton – Lockheed Martin

June 3, 2010June 3, 2010Orlando, FloridaOrlando, Florida


APMP Cost Analysis Task Force

“THE UGLY”

• Government releases Final RFP without Draft to save schedule

• Government shortens typical proposal delivery schedule

• Final RFP contains specification changes from what industry was expecting

• SSEB Cost Team Lead (CTL) brought in late and provided an example prior RFP that had following phrase under Guidelines:– “…Computer printouts are acceptable.”

• CTL adds MS Excel 2003 instructions to Cost Section L:– “…Offerors shall submit the Cost Formats in Microsoft Excel

2003. Excel spreadsheets shall include working formulas of calculation within the spreadsheet.”

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2012 Going Forward

• Overall Mission– IDENTIFY DISCONNECTS between offerors’ approaches in

developing cost proposals and the Government’s approach to evaluating cost proposals

– IDENTIFY ASSUMPTION ISSUES: Identify contradictory assumptions that drive the disconnects between Industry proposed costs and the Government Most Probable Costs

– NETWORKING: Provide networking opportunities with Government and Industry professionals

– EDUCATE: Provide education on cost analysis to both the costing personnel and the general body of proposal personnel

– ????Other Recommendations from group– Deliverables

• Update initial deliverable• Education via conference

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• Cost analysis is a critical component of proposals and program execution, requiring input and interaction from every part of the organization. Organizations outside of the cost analysis organization need to know how to interact and what the challenges are while cost analysis team themselves must find ways to be part of the overall team rather than outsiders. This presentation adapts Steven Covey’s 7 habits to cost analysis. This will include cost analysis considerations for proposers and customers in both commercial and federal procurements. In addition to presentation of each of the habits and lessons learned within each, the audience will be drawn in with a series of thought provoking questions. The seven habits and their summary in a cost analysis context follows”


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7 Habits

1. Be Proactive: Identify Cost Targets, Find Ways Of Meeting Conflicting Goals2. Begin With the End In Mind: Understand What the Key Cost and Requirements Issues Are3. Put First Things First: Planning4. Think Win/ Win: Negotiate So Costing/Pricing/Performance Yield Fair Return Fixed Price Low Bid Is Lose/Lose; Optimize Alternatives For Cost Vs. Requirements & Performance5. Seek First to Understand, Then to be Understood: Understand the needs of the proposal team as well as the customers.6. Synergize: Combine Knowledge/Resources With technology such as models, CERs, and databases.7. Sharpen the Saw: Spend Some Resources To Improve Processes & Tools, Training•


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Monthly Webex

• Resurrect the 2010 document submitted• Monthly call for networking and working group• Get panel organized for 2012 conference• Improve communication with government & industry• Help understand and resolve both positions

– Help government with funding issues… how to preserve industry base of knowledge / production people, etc. Avoid or minimize rif in production areas..

– UAV ok, missiles in trouble– Contractors bidding much higher than government can afford (e.g. contractor bidding 2x

government budget)

• Why cost isnt just “here is what it costs. Why won’t you just tell me… based on assumptions..

– Bid CAIV.. If you let me change the requirements slightly to reduce

• Govt industry panel…. Cost strategy• Cover better buying• COST ANALYSIS isn't just for proposals… it is for making real decisions for

industries• Discuss • E.g. Low price technically acceptable, affordability,


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Immediate actions

• Resurrect submitted paper• Target better buying and point on prior page

• Quentin is going to send his SE paper• Dan will distribute slides• Will distribute Bruce's pricing document

• Dan will post on blog

• Issue 2012 update to the paper

• Schedule meeting at Dec 21 11am eastern… Wednesday 8am


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APMP Government/Industry Cost Analysis Task Force

Documents

Transcript of APMP Government/Industry Cost Analysis Task Force