Cost proposal: Difference between revisions

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{{infobox4
|list1=
<ul>
<li>[[Project cost management]]</li>
<li>[[Bottom up budgeting]]</li>
<li>[[Cost tracking]]</li>
<li>[[Project budget]]</li>
<li>[[Baseline schedule]]</li>
<li>[[Inventory adjustments]]</li>
<li>[[Costing system]]</li>
<li>[[Validation master plan]]</li>
<li>[[Stages of project]]</li>
</ul>
}}
'''[[Cost]] proposal''' is probabilistic cost [[evaluation]] prepared in accordance with given requirements
'''[[Cost]] proposal''' is probabilistic cost [[evaluation]] prepared in accordance with given requirements
<ref> Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012) </ref>.
<ref> Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012) </ref>.
Cost proposal is part of '''conceptual design phase'''. Besides cost proposal, specific conceptual design and [[management]] [[plan]] are prepared
Cost proposal is part of '''[[conceptual design]] phase'''. Besides cost proposal, specific conceptual design and [[management]] [[plan]] are prepared
<ref> Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), p. 5 </ref>.
<ref> Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), p. 5 </ref>.
Cost proposal s often based on financial statements, executive budgets, [[accounting reports]] and historic data. Final document might include below<ref> Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), p. 176 </ref><ref> AIHA guideline, (2005) p. 18 </ref>:
Cost proposal s often based on financial statements, executive budgets, [[accounting reports]] and historic data. Final document might include below<ref> Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), p. 176 </ref><ref> AIHA guideline, (2005) p. 18 </ref>:
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* [[work]] sheets,
* [[work]] sheets,
* other factors and data,
* other factors and data,
* direct cost and indirect costs,
* [[direct cost]] and indirect costs,
* charts,
* charts,
* [[cost allocation]] plan,
* [[cost allocation]] plan,
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* [[government]] reviews,
* [[government]] reviews,
* similar products,
* similar products,
* organisational structure,
* [[organisational structure]],
* summary,
* summary,
* persons who prepared and approved,
* persons who prepared and approved,
* period that it refers to.
* period that it refers to.


== How to prepare cost proposal ==
==How to prepare cost proposal==
Preparation of cost proposal engages many teams and '''departments''' within the [[company]] such as: engineering, manufacturing, [[marketing]], [[quality]] control, supply chain and finance. Cost proposal should be
Preparation of cost proposal engages many teams and '''departments''' within the [[company]] such as: engineering, manufacturing, [[marketing]], [[quality]] control, supply chain and finance. Cost proposal should be
<ref> Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012) </ref><ref> Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012) </ref>:
<ref> Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012) </ref><ref> Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012) </ref>:
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* backed-up.
* backed-up.


== Procedure for cost proposal ==
==Procedure for cost proposal==
Crucial element of cost proposal is proper cost estimation. It is advised to prepare special '''procedure''' to support company in keeping clear pattern<ref> Oyer D. J., (2011) </ref>:
Crucial element of cost proposal is proper cost estimation. It is advised to prepare special '''procedure''' to support company in keeping clear pattern<ref> Oyer D. J., (2011) </ref>:
* '''methodology''' of [[price]] rates for direct and indirect costs should be described,
* '''methodology''' of [[price]] rates for direct and indirect costs should be described,
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<references />
<references />


== References ==
{{infobox5|list1={{i5link|a=[[Project budget]]}} &mdash; {{i5link|a=[[Bottom up budgeting]]}} &mdash; {{i5link|a=[[Cost center]]}} &mdash; {{i5link|a=[[Sales analysis]]}} &mdash; {{i5link|a=[[Normal cost]]}} &mdash; {{i5link|a=[[Quality planning]]}} &mdash; {{i5link|a=[[Contract costing]]}} &mdash; {{i5link|a=[[Work package]]}} &mdash; {{i5link|a=[[Master budget]]}} }}
 
==References==
* AIHA guideline, (2005), ''Health and Safety Requirements in Construction [[Contract documents|Contract Documents]]'', AIHA
* AIHA guideline, (2005), ''Health and Safety Requirements in Construction [[Contract documents|Contract Documents]]'', AIHA
* Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012), ''Enhancing Cost Realism through [[Risk]]-Driven Contracting: Designing Incentive Fees Based on Probabilistic Cost Estimates] in "Defense ARJ, April 2012, Vol. 19 No. 2 : 133–158", A Publication of the Defense Acquisition University
* Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012), ''Enhancing Cost Realism through [[Risk]]-Driven Contracting: Designing Incentive Fees Based on Probabilistic Cost Estimates] in "Defense ARJ, April 2012, Vol. 19 No. 2 : 133-158", A Publication of the Defense Acquisition University
* Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), ''Title 2 Grants and Agreements (Revised as of January 1, 2014): 02-CFR-Vol-1'', IntraWEB, LLC and Claitor's Law Publishing
* Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), ''Title 2 Grants and Agreements (Revised as of January 1, 2014): 02-CFR-Vol-1'', IntraWEB, LLC and Claitor's Law Publishing
* Oyer D. J., (2011), ''Pricing and Cost Accounting: A Handbook for Government Contractors'', Berrett-Koehler Publishers
* Oyer D. J., (2011), ''Pricing and Cost Accounting: A Handbook for Government Contractors'', Berrett-Koehler Publishers
* Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012),   [https://journals.sagepub.com/doi/pdf/10.1258/jms.2012.011051 ''Comparison of screening methods for conductive hearing loss identification in children: low-cost proposal''] in "J Med Screen 2012;19:1–7 DOI: 10.1258/jms.2012.011051"
* Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012), [https://journals.sagepub.com/doi/pdf/10.1258/jms.2012.011051 ''Comparison of screening methods for conductive hearing loss identification in children: low-cost proposal''] in "J Med Screen 2012;19:1-7 DOI: 10.1258/jms.2012.011051"
* Sawhill I., Karpilow Q., (2014), [https://www.brookings.edu/wp-content/uploads/2016/06/no-cost-proposal-sawhill.pdf ''A No-Cost Proposal to Reduce Poverty & Inequality''], Center on Children and Families at Brookings
* Sawhill I., Karpilow Q., (2014), [https://www.brookings.edu/wp-content/uploads/2016/06/no-cost-proposal-sawhill.pdf ''A No-Cost Proposal to Reduce Poverty & Inequality''], Center on Children and Families at Brookings
* Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), [http://www-geodyn.mit.edu/taylor_GRAIL_IEE12.pdf ''Managing GRAIL: Getting to Launch on Cost, on Schedule, and on Spec''] in "2012 IEEE Aerospace Conference", IEEE, USA
* Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), [http://www-geodyn.mit.edu/taylor_GRAIL_IEE12.pdf ''Managing GRAIL: Getting to Launch on Cost, on Schedule, and on Spec''] in "2012 IEEE Aerospace Conference", IEEE, USA

Latest revision as of 20:16, 17 November 2023

Cost proposal is probabilistic cost evaluation prepared in accordance with given requirements [1]. Cost proposal is part of conceptual design phase. Besides cost proposal, specific conceptual design and management plan are prepared [2]. Cost proposal s often based on financial statements, executive budgets, accounting reports and historic data. Final document might include below[3][4]:

How to prepare cost proposal

Preparation of cost proposal engages many teams and departments within the company such as: engineering, manufacturing, marketing, quality control, supply chain and finance. Cost proposal should be [5][6]:

  • realistic,
  • based on careful estimations,
  • as lowest as possible,
  • tested if possible,
  • backed-up.

Procedure for cost proposal

Crucial element of cost proposal is proper cost estimation. It is advised to prepare special procedure to support company in keeping clear pattern[7]:

  • methodology of price rates for direct and indirect costs should be described,
  • based on accounting records current, accurate and completed data should be developed,
  • guidelines how to change and estimate work force,
  • define methods of rates (for example special averages),
  • define methods of cost escalation,
  • review periodically rates and budget,
  • developing needed support patterns,
  • setting basic selection criteria,
  • setting quantity discounts for purchase of materials.

Author: Ewelina Gał

Footnotes

  1. ↑ Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012)
  2. ↑ Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), p. 5
  3. ↑ Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), p. 176
  4. ↑ AIHA guideline, (2005) p. 18
  5. ↑ Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012)
  6. ↑ Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012)
  7. ↑ Oyer D. J., (2011)


Cost proposal — recommended articles
Project budget — Bottom up budgeting — Cost center — Sales analysis — Normal cost — Quality planning — Contract costing — Work package — Master budget

References

  • AIHA guideline, (2005), Health and Safety Requirements in Construction Contract Documents, AIHA
  • Dorey M. S. P., USAF, Oehmen J., Valerdi R., (2012), Enhancing Cost Realism through Risk-Driven Contracting: Designing Incentive Fees Based on Probabilistic Cost Estimates] in "Defense ARJ, April 2012, Vol. 19 No. 2 : 133-158", A Publication of the Defense Acquisition University
  • Office of The Federal Register, Enhanced by IntraWEB, LLC, (2014), Title 2 Grants and Agreements (Revised as of January 1, 2014): 02-CFR-Vol-1, IntraWEB, LLC and Claitor's Law Publishing
  • Oyer D. J., (2011), Pricing and Cost Accounting: A Handbook for Government Contractors, Berrett-Koehler Publishers
  • Samelli A. G., Rabelo C. M., Pereira M. B., Portela M. N., Sanches S. G. G., Neves-Lobo I. F., (2012), Comparison of screening methods for conductive hearing loss identification in children: low-cost proposal in "J Med Screen 2012;19:1-7 DOI: 10.1258/jms.2012.011051"
  • Sawhill I., Karpilow Q., (2014), A No-Cost Proposal to Reduce Poverty & Inequality, Center on Children and Families at Brookings
  • Taylor R. L., Zuber M. T., Lehman D. H., Hoffman T. L., (2011), Managing GRAIL: Getting to Launch on Cost, on Schedule, and on Spec in "2012 IEEE Aerospace Conference", IEEE, USA
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