Friday, January 6, 2012

Conditions That May Indicate Significant Estimating System Deficiencies

The Government loves to devise lists of things that might be indicative of other things. The Inspector Generals of the Executive Agencies (Defense, Energy, Interior, Commerce, Homeland Security, etc), for example, have "fraud" indicators meaning that if one or more of the indicators are present, there could be a chance of fraud occurring somewhere in the contractor's organization. The Government has financial capability risk indicators meaning that if one or more of these indicators are present, the contractor may be in dire financial straights and at risk of going bankrupt.

We found another list the other day. This one pertains to contractors' estimating system. As you know from previous postings, the estimating system is one of the six business systems that if found deficient, will result in payment withholds.

Here's the list. The following have been identified by the DoD as conditions that may indicate potentially significant estimating deficiencies and excessive costs to the Government.

  • Failure to ensure that historical data on the same or similar work are available to and utilized by cost estimators where appropriate.
  • Continuing failure to analyze material costs or failure to perform subcontractor cost reviews as required.
  • Consistent absence of analytical support for significant proposed costs.
  • Excessive reliance on individual personal judgment where historical experience or commonly used standards are available.
  • Recurring significant defective pricing findings within the same cost element(s).
  • Failure to integrate relevant parts of other management systems (e.g., production or cost accounting) with the estimating system so that the ability to generate reliable cost estimates is impaired.
  • Failure to provide established policies, procedures, and practices to persons responsible for preparing and supporting estimates.
  • Management information that does not match the data in proposals.
  • Standards for labor and material costs that are not current.
  • Changes in make-or-buy decisions not disclosed.
  • Inappropriate or misleading sampling techniques.
Contractors might want to use this listing to perform their own self-assessments.

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