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/
 

1 thought on “W8_MFO_ Benchmark of Company Cost Estimate Process vs GAO Process”

  1. Very very nice Pak Fakhri!!!! You have produced an outstanding paper and I hope that your management will take your advice seriously and implement your recommendations.

    As with your Template Analysis I would also urge you to include in Step 7 the use of a “Before” and “After” Pareto Chart https://www.qimacros.com/lean-six-sigma-articles/pareto-chart-before-after.jpg to show your management that IF they accept your recommendations that you have a way to measure and assess just how effective those changes are in obtaining more ACCURATE, RELIABLE and PRECISE cost estimates.

    Keep up the good work and I really do hope you can finish your paper in time to get it published in the October issue of PMWJ? Getting pretty late right now so you need to finish it up in the next day or two….

    BR,
    Dr. PDG, Jakarta, Indonesia

     

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