W16_APE_Comparison Cost Estimate Process


  1. Problem Definition

After several years also performed cost estimation either during feasibility study, bid process and construction implementation, I realized that there is a good process for estimation and possibility to propose it using internal memo as the new standard procedure of estimation. But before, I will analyze what is the weakness of existing process compare to this reference.  

 

 Figure 1

Figure 1 Work on Cost Estimation

 

  1. Identify the Feasible Alternative

The main part of my internal memo to my management will be the comparison between GAO with current estimation process highlighted in some weakness process.   

  1. Development of the Outcome for Alternative

GAO described step by step process for cost estimation[1] as follow:

 Figure 2

Figure 2 GAO Estimation Process

There are four main divisions: a. Initiation and research, b. Assessment, c. Analysis and d. Presentation. Based on these divisions then I will develop check list comparison what is my company now doing for the estimation to see if we skip some steps following this process.

  1. Selection Criteria

The final output of this simple analysis will be to see what are the missing steps from the current procedures compare to GAO reference.     

  1. Analysis and Comparison of the Alternative

The composed Table 1 shows the missing steps of existing process compare to GAO:

 Table 1

Table 1 Check List Existing Company Cost Estimate Process Compare to GAO

Table 1 clearly shows that my company definitely skips many important steps for cost estimation procedure:

  • No estimation structure established. It is free style template developed by each person without accountability track record of the person doing the estimation
  • No sensitivity analysis. Without this analysis the use can’t have their guideline on how they should perform another interpretation stage using this output
  • No risk and uncertainty analysis. It is obvious the problem if we have using the estimation output in future
  • Update the estimate to reflect actual cost/change. Probably this is the most weakness of common estimation process. Without updating, we can’t have the reference database for future project, and that is the important thing to have close out report
  1. Selection of the Preferred Alternative

GAO provides step by step cost estimate process definitely provide reliable output for cost estimate. This process is easily auditable and traceable which I should propose to my management with force field tool[2] & [3] for their consideration.

Figure 3 

Figure 3 Force Field Analysis for Cost Estimation Process Selection

  1. Performance Monitoring and the Post Evaluation of Result

In my opinion, adaptation of new process is not the easy one because we have to change the old habit of estimation process. This will require some introduction and intensive in house training during transition time later on.       

References

[1]United States Government Accountability Office, GAO. (2009). GAO Cost Estimating and Assessment Guide GAO-09-3SP. Washington DC, United States: Richey, K., Echard, J., Cha, C., Borecki, G., Chaplain, C., Hung, R., Kelly, J., Kingsbury, N., Phillips, C., Pickett, P., Powner, D., Rhodes, K., Vodraska, A. 

[2]Brassard, Michael., Ritter Diane. (2010), The Memory Jogger 2 (2nd Edition) (pp.86-90).New Hampshire, United States:Memory Jogger

[3]Wells, Stephen. (2006), Force Field Analysis Mini-Tutorial Quality Management, Retrieved from http://www.freequality.org/documents/knowledge/Mini-Tutorial.pdf, web 12 March 2013

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3 Comments

Filed under Arif P, Week 16

3 responses to “W16_APE_Comparison Cost Estimate Process

  1. AWESOME posting, Tommy!!! Love it!!!!

    Too bad you already picked your paper topic as this benchmark comparison would make a PERFECT 3000 – 4000 word paper. Same thing with the GAO’s “Scheduling Best Practices”.

    Folks, for those of you have yet to really look through the references I provided you,it would be WELL WORTH YOUR TIME to do so!!

    Not only are these FREE for you to download and SHARE (unlike Humphrey’s) but these two GAO publications involved many of the best and brightest minds in the industry, including many from PMI, AACE and INCOSE as well as the GAO Internal Auditing experts, which is the US government’s AUDITING office. roughly equivalent to SAI/BPK in Indonesia.

    Meaning these are SERIOUS standards which are well worth benchmarking your corporate or governmental processes against.

    Keep up the great work Tommy!!!

    BR,
    Dr. PDG, Jakarta

  2. Pingback: W9_EY_Estimating Process Benchmark | GARUDA AACE 2015

  3. Pingback: W18_EY_Cost Estimating Process Selection | GARUDA AACE 2015

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