Ch9 Pricing& estimating
Types of global pricing strategies
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1) Type I acquisition - one-of-a-kind program with little or no follow-on potential.
2) Type II acquisition – the new program with potential for large follow-on business or representing a desired penetration into new markets.
Types of estimate
Approximate estimate (or top-down estimate)
Approximate estimate (or top-down estimate)
• Definitive estimate, or grassroots buildup estimate
Learning curves
Overhead rates
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• Actual costs to date and estimates to completion
• Proposal data
• Marketing intelligence
• Management goals
• Past performance and trends
Step to determine project price
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Step 1: Provide a complete definition of the work requirements.
Step 2: Establish a logic network with checkpoints.
Step 3: Develop the work breakdown structure.
Step 4: Price out the work breakdown structure.
Step 5: Review WBS costs with each functional manager.
Step 6: Decide on the basic course of action.
Step 7: Establish reasonable costs for each WBS element.
Step 8: Review the base case costs with upper-level management.
Step 9: Negotiate with functional managers for qualified personnel.
Step 10: Develop the linear responsibility chart.
Step 11: Develop the final detailed and PERT/CPM schedules.
Step 12: Establish pricing cost summary reports.
Step 13: Document the result in a program plan.
Types of Pricing reports
A detailed cost breakdown for each WBS element.
A total program manpower curve for each department.
A monthly equivalent manpower cost summary.
A yearly cost distribution table.
A raw material and expenditure forecast.
A functional cost and hour summary
A monthly labor hour and dollar expenditure forecast.
Total program termination liability per month.
(LCC)Life-cycle costing
R&D costs
Construction cost
Production cost
Operation and maintenance cost
Product retirement and phase-out cost (also called disposal cost)