DPA

Costing Exercises and Demonstrations

Ken Young

PFG

Land and Maritime

DPA

Exercises for over lunch

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

DPA

Area of the room.

B

L

Area =L X B

Could measure dimensions with a long tapeCan use a comparison carpet tiles, tablesetcCould Guess (SWAG)

DPA

Price of a box of “Goldscrews”

*

* ***

*

*

ParametricsRelationship between costand physical parametersRough Regression in yourheadCan use Excel

DPA

Goldscrew regression

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0 50 100 150 200 250 300 350 400 450

length x diameter product

Pri

ce p

er 2

00 £

Series1

Goldscrew regression

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0 200 400 600 800 1000 1200 1400 1600 1800

Product VolumeC

ost

per

200

£

Series1

Volume vs costR2 = 0.962

Length by diameter productvs costR2 = 0.941

DPA

Equations

Price = 0.00274(Volume)+ 0.274

Price + 0.0106(length x diameter) + 0.009

DPAConfidence Limits

Goldscrew regression

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0 200 400 600 800 1000 1200 1400 1600 1800

Product Volume

Co

st p

er 2

00 £

Series1

DPAA Real Example

Type 23 Manhour Economies

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

23-01 23-02 23-04 23-05 23-06 23-07 23-08 23-09 23-10 23-11 23-12 23-13 23-14 23-15 23-16 23-17

Ship

Manhours

Facto

r

90% Confidence Individual Values

90% Confidence Mean Value

Actuals Ratio

Regression

10% Confidence Mean Values

10% Confidence Individual Values

DPA

Lamps WLC

Price £0.30 £3.99 Life 1000hrs 10000hrs Cost per 10khrs £3.00 £3.99 Consumption 100w 20w Cost for 10k@8p £80 £16 labour to replace £100 £10 WLC for 10,000hrs £183 £30

DPA

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

DPA

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 !

DPA

Demonstrations of Models

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

DPAPrice BuildProduction Manhours

Scrap and rectificationLearnerLabour rateSub TotalProduction OverheadMaterialsSub ContractBought out FinishedHandling OverheadSub TotalG & A OverheadescalationProfitPrice

Data can be collectedagainst most of theseheadings. Rates willbe separately negotiated.Can be built bottom upTime consuming andexpensive

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Cost Forecasting

Pricing

AAC

PPP/PFI

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:

•EVM

•Risk Analysis

•Assurance

•Consultancy

DPA

Headquarters

Abbey Wood

Rosyth

Newcastle

Wyton

London

FarehamPortsmouth

Devonport

Yeovil

Birmingham

Preston

Glasgow

Belfast

Barrow

Manchester Derby

StevenageBristolWestbury on Trym

Locations

DPA 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.

DPA

04/21/2315/02/1999 Template

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

DPA

How to task Cost Forecasters

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