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36 Cards in this Set
- Front
- Back
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Rate of Improvement (ROI) |
ROI + Slope = 100% |
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Order of preference in slope selection is |
-A curve developed from data pertaining to the production of the same product -The medium % from a group of curves for items having some similarity to the end item -The median % from the product category in which the item would most likely be included |
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Is the Slope Impact on Cost Negotiable |
Yes |
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3 Approaches for Quantifying Risk are |
-Sensitivity Analysis -Monte Carlo Simulation -Symmetric Approximation
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Sensitivity Analysis (scope&requirements risk) |
-Measure how sensitive system cost is to variations in non-cost parameters -Method of testing assumptions by adjusting cost drivers to indicate magnitude of variations -Provides a quantitative assessment of potential changes to cost drivers -Select variables and adjust one at a time based on different assumptions |
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Monte Carlo Simulation (similar to symmetric) |
-Identify areas of uncertainty -Develop the probability distribution for each area -Works well with cost risk. Especially suited for analyzing schedule risk. Many scheduling tools has have included a built in Monte Carlo simulation to analyze schedule risk and critical paths -Randomly sample from each element and develop a distribution of total cost |
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Symmetric Approximation |
-Identify areas of uncertainty -Develop the probability distribution for each area -Calculate the mean and variance for each distribution -Estimate the mean and variance for the total cost |
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Symmetric Approximation works |
extremely well with cost risk (Gov't usually uses) |
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Improvement Curve Theory |
As the cumulative quantity of units produced doubles, the costs will decrease at a constant rate |
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The higher the % of ROI |
the greater the cost savings to government (usually the slope that is the lowest) |
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What are the 2 theories relating to Improvement Curves |
Unit Improvement (most widely used by Gov't) Cumulative Average |
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Environment of Cost Reduction (Conditions of Improvement) |
-Pressure to improve as a result of competition, desire to increase profit, improve ROI -Complex end item or process(more opportunities of improvement) -Stable design (with the exception of periodic changes for the purpose of reducing cost) -Continuous manufacturing process |
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Given 2 slopes 90% and 70%, which one would be steeper |
70% |
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What 4 categories of Cost Risk Analysis |
Scope/Requirements Risk Cost Risk-more common Schedule Risk-more common Technical Risk-more common |
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Uniform distribution |
Every value between the minimum and the maximum has equal probability of occurring. |
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Triangle distribution |
Requires Min, Max, & most likely value to be known. The Mode is the Peak and is typically the value used by the Government |
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Discrete distribution |
Used where discrete events/outcomes exist and the means are available to the objectively/subjectively state the likelihood of each outcome occuring |
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Normal distribution |
Used when outcomes are equally likely to occur on either side of the average value (need to be able to determine the mean and Std deviation) |
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What are the 5 distribution shapes |
Uniform Triangle Discrete Normal Beta |
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Beta distribution |
Similar to the normal distribution, but does not allow for negative cost, this continuous distribution can be symmetric or skewed |
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Cost Realism analyses |
shall be performed on Cost-Reimbursement contracts to determine the probable cost of performance for each offeror |
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Cost Realism in Cost-Reimbursement contracts |
Must use the probable cost of contract performance to determine best value May use cost realism analysis as a evaluating factor for contract technical requirements and risk |
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Cost Realism may also be used in Fixed-Price contracts and |
Must not adjust offered prices for your analysis |
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If your taking a proposal review and if you catch a contractor with unrecorded overtime what should you do |
-talk to KO or contractor -perform an audit (DCAA comes in) -if you find a mistake cite contractor for non-compliance |
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What are the types of uncompensated overtime |
-40 HR Accounting System -Full-Time Accounting -Forward Pricing with Full-Time Accounting |
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Considering the uncompensated overtime effect on Cost Realism |
-The solicitation shall require offerors to identify uncompensated overtime hours and the uncompensated overtime rate included in their proposals and subcontractor proposals
-The CO shall insert the provision at 52.237-10, Identification of Uncompensated Overtime, in all solicitations valued above the SAT, for professional or technical services |
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3 types of incentives |
Reward technical performance –may be in an incentive contract Reward schedule performance-may be incentive contract Emphasize cost contract shall be an incentive contract |
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When using incentives you should know |
What's important to the program? What motivates the contractor? (Data rights) Match the program objectives to the incentives |
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Fixed Price Incentive Firm (FPIF) |
Turns into FFP (0/100) with large overruns |
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Cost Plus Incentive Fee (CPIF) |
Turns into CPFF (100/0) with large under-runs or overruns |
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The greater the potential variability between the projected and actual cost, the greater the cost risk |
True |
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What must you have in highly complex type of contracts |
you need to have a performance incentive in there |
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Can you have more than one contract type within the same contract |
Yes, you would have a Hybrid Contract |
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A Hybrid Contract may require additional monitoring |
to ensure payment is made IAW agreed-upon terms |
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DCAA recognizes 3 acceptable methods of accounting for uncompensated overtime |
-Calculated a separate average labor rate for each labor period -Determining the % of total hours worked on each cost objective -Compute an estimated hourly rate for each employee for entire year based on total hours |
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40-Hour Accounting System |
charges only 40 hours per week per employee regardless of how many hours the employee works |
