W9_MFO_ Benchmark of Company Cost Estimating Template against NPS Template

  1. Problem Definition

Refer to Dr Paul comment in the 2nd Paper Submission, author want try to benchmark the Company cost estimating template against US National Park Service (NPS) estimating template using Likert Scale / Compensatory method.

  1. Identify the Possible Alternative

To make an estimate, the company already has a cost estimation template. But, using this template, our estimation results are mostly inaccurate so there needs to be an improvement on the template. The description of the template can be seen in figure 1.

Figure 1. Company Cost Estimating Template

Author want try to benchmark the company estimating template with “the best in class” that is US National Park Service (NPS) estimating template. National Park Services has 3 level of estimating, Class A, Class B and Class C. The best fit with Company estimating process regarding to National Park Services is Class A estimating, where Class A Construction Cost Estimates are referred to as actual estimates by the design. These estimates are generally prepared with a fully defined scope of work (SOW), complete with all drawings and construction details, and complete set of project specifications. The accuracy of Class A estimate is -5% to +15%. On figure 2, it shown the template use by National Park Services for estimate project with Class A estimate level.

Figure 2. National Park Services Template Class A Construction Cost Estimate

  1. Development of The Outcome for Alternative

Refer to company template and National Park Services/NPS template, there is gap between them from estimate mark-ups aspect, there is 11 aspect consider by NPS for creating an estimation, that are Published Location Factor, Remoteness Factor, Federal Wage Rate Factor, Taxes, Design Contingency, General Condition, Historic Preservation Factor, Overhead & Profit, Contracting Method Adjustment, Bond Permits, Inflation & Escalation, to identify each aspect author develop using likert to define which aspect must be consider, after that author can make purpose suggestion to company for a better estimate template, the likert score explain on table 1 below :

Table 1. Likert scale

  1. Selection Criteria

We will perform a checklist of each aspect proposed by NPS estimating template. If there are gap from the checklist and potentially to be fixed, it will be recommended to management to improve the estimation process.

  1. Analysis & Comparison of Alternative

Based on data in figure 1 and figure 2, the authors compare both template, calculate the average likert value and we will see which attributes meet the NPS template and which have not.

Table 2. Result of Company template vs NPS template

Refer to table 2, we get average of company template condition is 1.09. Refer to table 1, it means that the company template highly consider to implement NPS template because it effect on estimate value and the fact that estimation value almost always lower than actual value. Based on Table 2, it found that there are three critical aspect which still not fully consider on company template like design contingency, historic preservation factor, and contracting method adjustment. So, we can give the recommendation to the management to improve our template especially from aspect which still not fully consider.

  1. Selection of the Preferred Alternative

Based on above assessment and analysis, company must consider unimplemented aspect and improve the template for a better and reliable estimating process.

  1. Performance Monitoring and The Post Evaluation of Result

Management should consider to use of NPS estimating template to avoid over budget or under budget estimate and monitoring should be conducted during estimation process to ensure that all requirements are met.

Reference:

  1. GAO (March 2009). GAO Cost Estimating and Assessment Guide, A Reliable Process for Developing Credible Cost Estimates pages 8-11. Retrieved on 12th July 2014 from http://www.gao.gov/new.items/d093sp.pdf
  2. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.
  3. Cost Estimating Requirements Handbook National Park Service (February 2011). Retrieved on 18th July 2017 from https://www.nps.gov/dscw/upload/CostEstimatingHandbook_2-3-11.pdf
  4. Estimating Procedure Document. (2013). PT. ABCD. (Disguised).
  5. 08.0 – Managing Cost Estimating & Budgeting. Retrieved from http://www.planningplanet.com/guild/gpccar/
  6. Likert Scale (2017). Retrieved from https://www.surveygizmo.com/survey-blog/likert-scale-what-is-it-how-to-analyze-it-and-when-to-use-it/
 

W8_MFO_ Benchmark of Company Cost Estimate Process vs GAO Process

  1. Problem Definition

Refer to Dr Paul comment in the 2nd Paper Submission, author want try to benchmark the Company Estimate Process with GAO Estimate Process using Likert scale / Compensatory method.

  1. Identify the Possible Alternative

To make an estimate, company already has a procedure. We must follow the steps contained in that company’s procedures. There are at least five steps to follow. The description of the estimation process can be seen in figure 1.

Figure 1. Company Cost Estimating Process

GAO cost estimating process consist of The Twelve Steps of a High-Quality Cost Estimating Process. Each of the 12 steps is important for ensuring that high-quality cost estimates are developed and delivered in time to support important decisions. In below, we can see the GAO’s process and this is the same process which we need to apply as part of each Phase Gate, including the approved budget as part of each Phase Gate Decision Support Package.

Figure 2. GAO Estimating Process

  1. Development of The Outcome for Alternative

Base on both cost estimating process, author will compare that using the twelve steps GAO estimating process and compensatory method. For compare using compensatory method, author determine the likert scale like on table below.

Table 1. Likert scale

After determine the likert scale and refer to 12 steps GAO estimate process, we can put each task with Likert value who meet with current condition of company in estimation process like on table below.

Table 2. Company estimating process with likert value

  1. Selection Criteria

We will perform a checklist of each stage proposed by GAO approach in the estimation process. If there are gap from the checklist and potentially to be fixed, it will be recommended to management to improve the estimation process.

  1. Analysis & Comparison of Alternative

Based on the assessment of checklists in table 2, the authors calculate the average likert value and we will see which attributes meet the GAO requirements and which have not.

Table 3. Result of GAO vs Company Estimating Process

Refer to table-3, only step-1 or define estimate purpose which already meet with GAO, the other step (step 2 until step 12) still remind to consider highly and very highly implemented.  Company need to consider GAO for a better and reliable estimating process, because 12 steps purposed by GAO as one of  best practice in process estimation.

  1. Selection of the Preferred Alternative

Based on above assessment and analysis, company must consider unimplemented step for a better and reliable estimating process, because 12 steps purposed by GAO as one of best practice in process estimation.

  1. Performance Monitoring and The Post Evaluation of Result

Management should consider the use of GAO Estimating Process as part of the estimation stage process to avoid Over Budget and Behind Schedule Project and monitoring should be conducted during estimation process to ensure that all requirements are met.

Reference:

  1. GAO (March 2009). GAO Cost Estimating and Assessment Guide, A Reliable Process for Developing Credible Cost Estimates pages 8-11. Retrieved on 12th July 2014 from http://www.gao.gov/new.items/d093sp.pdf
  2. Sullivan, W.G., Wicks, E. M., Koelling, C. P. (2014). Engineering Economy, Chapter 14, page 559 to 617. Pearson. Sixteenth Edition.
  3. Estimating Procedure Document. (2013). PT. ABCD. (Disguised).
  4. 08.0 – Managing Cost Estimating & Budgeting. Retrieved from http://www.planningplanet.com/guild/gpccar/
  5. Likert Scale (2017). Retrieved from https://www.surveygizmo.com/survey-blog/likert-scale-what-is-it-how-to-analyze-it-and-when-to-use-it/