costmetrix whitepaper

8/14/2019 CostMetrix Whitepaper

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Developing and Deploying High-Performance Parametric Cost

Estimating Systems with CostMetrix

John P. Harrell, PresidentNHYSOFT, Inc.

ABSTRACT

Companies develop proprietary parametric cost models because they need fast, accurate costestimates, and have specific estimating needs that cannot be met using commercial cost models.

CostMetrix is a revolutionary set of software products from NHYSOFT, Inc., designed to simplify

the development and use of custom parametric cost models. ModelBuilder andEstimator are theprogram modules which provide a complete cost estimating solution, from the initial cost modeldesign stage through validation and deployment to staff members for project cost estimating withcustomized reports. CostMetrix ModelBuilder is used to design, validate, and document parametriccost models, and CostMetrix Estimatoris used to generate cost estimates based onModelBuildercostmodels.

In this paper, some of the benefits of proprietary parametric cost models are discussed and the keyfeatures ofModelBuilder andEstimatorare described, including how they are used to develop anddeploy proprietary parametric cost estimating systems. Examples are shown of cost modeldevelopment and parametric cost estimating relationship (CER) derivation using ModelBuilder, andcost estimate preparation and rationale generation usingEstimator.

INTRODUCTION

Cost estimating is a critical business function in many industries such as manufacturing, engineering,and construction. For these, the quality of the project cost estimates can determine the ultimate successor failure of the company. Parametric cost models are powerful tools that can provide accurate

project cost estimates in a fraction of the time and effort of traditional methods. Indeed, they are soeffective that the U.S. Department of Defense (DoD) stated in the Parametric Estimating Handbookthat using parametric cost models can result in significantly reduced proposal development,evaluation, and negotiation costs, and associated cycle time reductions.

Parametric cost models fall into two general categories; commercial andproprietary (i.e., company-developed). Commercial parametric models earned the name because they are marketed commerciallyfor cost estimating purposes. They contain cost estimating relationships (CERs) derived from the pastexperience of multiple companies in a general industry category. While they can provide valuableinsights with an industry average cost estimate, they have the following drawbacks.

Since they are based on costs accumulated from many companies, they must first becalibrated to provide accurate estimates for a specific company.

They use cost parameters such as quantity, size, weight, type of packaging, andmanufacturing rate. Cost parameters unique to a specific company typically cannot beincorporated into the framework of a commercial cost model.

It is difficult, if not impossible to customize commercial cost models to conform to acompanys unique business processes or culture. For example, there is little or no ability totailor the individual cost elements of a commercial cost model to meet the specificrequirements of each proposal.


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The annual license or usage fees for commercial cost models can be quite costly. In manycases, the costs are beyond the means of small companies.

On the other hand, proprietary cost models are developed by a company for their own use based ontheir own historical cost data. A key reason companies develop proprietary parametric cost models isbecause they have estimating needs that cannot be met using commercial parametric models. Some of

the specific advantages of proprietary cost models are:

Since the cost model is based on the companys own historical cost data, it is effectively self-calibrated.

The cost elements of a proprietary cost model can be structured to conform to a companysspecific business processes and tailored to meet the requirements of each proposal.

The algorithms and estimating methods in a proprietary cost model can be optimized to bestrepresent the specific products, cost-drivers, technologies, processes, and business culture ofthe company.

Company-unique cost parameters can be used to achieve the most accurate cost estimatingrelationships.

The cost estimating relationships in a proprietary cost model are the property of the companythat developed them and no annual license fees are required to use them.

For these reasons, a well-designed proprietary cost model is generally more flexible and providesmore accurate estimates than a commercial model. Unfortunately, until recently there has been a lackof specialized tools to assist the individual or company in the development and use of proprietary costmodels, particularly cost models that rely on historical cost data for the derivation of CERs.

CostMetrix is an integrated set of Windows-based software programs from NHYSOFT, Inc., createdspecifically to facilitate the development and use of proprietary parametric cost models. Theseprograms were designed to solve the real-world problems of parametric cost model development and

deployment.

ModelBuilder is used for cost model development and validation, whereas Estimator is used forcreating cost estimates with those cost models. This paper describes the major steps involved indeveloping, validating, and using a parametric cost model with ModelBuilder and Estimator. Indescribing this process, many of the features and capabilities of the two programs will be shown, andsome of the common considerations and cost model techniques will be illustrated.

USING MODELBUILDER TO DEVELOP COST MODELS

ModelBuilder was created specifically to facilitate the development of proprietary parametric costmodels and makes the process faster, easier, and less expensive than using other tools or manualmethods. Some of the features that makeModelBuilderso effective for cost model development are:

ModelBuilderuses an activity-based cost element structure, so multiple tasks can be definedto represent the major work elements of the project. Each task can have its own costestimating relationships for labor, material, or other direct costs. This allows you to build costmodels that are very sophisticated, yet easy to use and flexible enough to adapt to diverseestimating needs.

It includes a powerful Solver that can automatically derive parametric cost estimatingrelationships using historical data compiled from your companys prior projects. It provides a


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real-time graphical representation of the CER and analyzes the curve fit accuracy andcorrelation using standard statistical measures to help the developer assess the quality of thecost model.

ModelBuilder can automatically adjust material and other direct costs based on escalationtables to calibrate historical costs to current year dollars.

ModelBuildercan also incorporate known cost estimating relationships for tasks. ModelBuilderperforms cost risk analysis which can help companies determine the potential

cost variance before the project starts.

It automatically generates a comprehensive set of reports that fully document the cost modeland its CER statistics for internal review or audit purposes.

It has a logical screen layout and consistent data entry format that makes it easy to maintainand update cost models, even by someone other than the original developer. New historicaldata can be entered and CERs updated in minutes rather than days.

ModelBuildercost models can be easily and securely distributed to cost estimators for fast,efficient estimating with CostMetrixEstimator.

The process of developing, validating, and documenting a parametric cost model withModelBuilderisillustrated in the seven basic steps described below.

Step 1 Define the Task List

The first step in building a cost model with ModelBuilderis to identify the key work elements oractivities that make up the business process being modeled. For example, assume that yourcompany designs and manufactures turbopumps and you wish to develop a cost model to estimatethe cost of the design process for bidding and proposal purposes. You have historical cost datafrom past design projects that will be used to help build the cost model. After studying the pastprojects, you determine that the design process actually consists of the following six key tasks.

Requirements DevelopmentDesign LayoutDraftingAnalysisDesign ReviewProject Management

In addition, the Analysis task can be broken down into three subtasks1:

Computation Fluid Dynamics (CFD) AnalysisStress AnalysisBearing Life Analysis

In a ModelBuilder cost model, each of these tasks can have its own unique cost estimatingrelationships for labor, material, and/or other direct costs (ODC). These work elements have been

1 The depth to which tasks are broken down in a cost model depends on the specific estimating needs. Ingeneral, the cost elements should be broken down until the scope of each one is clearly definable. Ifpossible, they should each relate to a single basic function or work activity, and be characterized by nomore than two or three principle cost driving parameters. The task list should also be structured to affordestimators adequate flexibility in selecting tasks appropriate for each cost proposal.


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assembled into a hierarchical Task Listshownin Figure 1 below, which also highlights some of thekey features of the main window ofModelBuilder.

Figure 1. Features of the ModelBuilder main window

The Task Listuses a tree structure format where task and subtasks are displayed much like files andfolders are displayed for a disk drive. Tasks and subtasks are added and deleted using the controlbuttons directly above the Task List. Tasks can also be dragged from one position in the list to anotherto rearrange their order.

The main window also includes the Parameter Catalog, a list of all the parameters used in the cost

model. While parameters can be simple numerical quantities such as weight, size, or the number ofparts,ModelBuilderalso allows you to employ special types of parameters such as grade lists, scales,and computed parameters, for more sophisticated cost models. Because of space limitations in thispaper, the reader is referred to theModelBuilder Users Guide for a detailed explanation of these typesof parameters.

The Task Summary Info tab on the main window is where two important pieces of information aboutthe selected task are specified; the task description and type. The task description is used tocommunicate the basic meaning and scope of each task. It is displayed to cost estimators when thecost model is used withEstimator. The task type options are explained in the next section.

Task List Parameter CatalogTask Summary Info Tab

Main Function Buttons


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Step 2 Assign Task Types

Tasks can be assigned one of six basic types, depending on the type of CER the task will use.

Summary tasks (indicated by the icon) are created automatically whenever subtasks are entered. Thecost of a Summary task is simply the cost of all subtasks under it in the task list hierarchy. As for theother tasks, the general guidelines shown in Table 1 are used to assign types.

Table 1. Guidelines for assigning task types in ModelBuilder

Case CER Types Used

CER known. Can be a fixed cost, a function of taskduration, or any explicit function of parametervalues and/or the cost of other tasks

Fixed (F)

Level of Effort (L)

Explicit Formula (E)

Cost estimate to be entered manually Manual Entry (M)

CER unknown but historical data available Parametric (P)

Fixed Cost Tasks

If the cost estimate for a specific task is known to be a fixed amount of labor, material, and/orODC, then a Fixed Costtype should be assigned. For example, the first task in this cost model, Requirements Development, is designated a Fixed Cost task. The task type is assigned byselecting the task with the mouse and clicking the Fixed Costbutton on the Task Summary Infotab of the main window.ModelBuilderwill then display an F icon in front of the task name toindicate its type at a glance.

Level of Effort Tasks

If the cost estimate for a specific task is known to be proportional to the duration of that task,then aLevel of Efforttype is assigned. For example, the Project Managementtask is a Level ofEffort type because the cost is based on the length of the task. For Level of Effort tasks,ModelBuilderdisplays an L icon.

Explicit Formula Tasks

For tasks that have other types of known CERs, an Explicit Formula type can be used. Forthese, CER formulas may be entered for labor, material and/or other direct costs, and mayinclude parameter variables and/or variables relating to the cost of other tasks in the cost model.Design Review is an Explicit Formula task that uses a CER based on the new design fraction(percent new design) of the pump. For Explicit Formula tasks, ModelBuilder displays an Eicon.

Manual Entry Tasks

If a third party (such as a subcontractor) must provide the estimate for a task, then the ManualEntry type is assigned. This type lets the cost estimator enter labor, material, and other directcosts for that task manually. Bearing Life Analysis is a Manual Entry task. For this type,ModelBuilderdisplays an M icon.


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Parametric Tasks

If the CER for a task is not known, but historical cost information is available from multiplepast projects, then a Parametric task should be used to derive CERs automatically. This is avery powerful type of task inModelBuilderand its use will be discussed in more detail in thenext section. For this type,ModelBuilderdisplays a P icon.

The task type is quite simply assigned by selecting the task name in the Task List and clicking theappropriate task type button on the Task Summary Info tab on the main window.

Step 3 Assign Parameters to Parametric Tasks and Enter Historical Data

Parametric tasks are one of the most powerful features ofModelBuilder because the Solver canautomatically derive multivariable CERs from raw historical cost data. Therefore, the cost modeldeveloper does not have to manually process reams of cost data to develop CERs. It also does notrequire an in-depth knowledge of statistical analysis techniques.

ModelBuilder evaluates the parameters that you consider to be cost drivers, seeking to identifycorrelation between actual costs and parameter values on multiple past projects. Parameters are

assigned to each task by dragging them from the Parameter Catalog in the upper right hand region ofthe main window, and dropping them onto the Parameter Assignments tab for each Parametric task, asillustrated in Figure 2. This creates links (i.e., mathematical associations) between the parameters andthe tasks. Parameters can be assigned independently to the labor, material, or ODC categories of a taskand three independent CERs will be derived.

Figure 2. Parameters are assigned to tasks by dragging and dropping

Drag


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ModelBuilderarchives past project cost and parameter information in a database. Figure 3 shows theProject Data window where labor, material, and ODC are entered on a project-by-project and task-by-task basis. Costs can be entered in any number of user-defined cost categories. For example, laborcategories consist of the various labor grades used by the company. Individual material categoriesmight be defined for items such asparts, raw materials, and tools, and ODC categories might includetravel, reproduction, data processing, etc. For convenience, escalation rates can be entered and

ModelBuilderwill adjust all material and ODC entries to current-year equivalent values automatically.A total of eight past projects were used in this cost model.

Figure 3. Historical cost and parameter information is entered onthe Project Data window

Step 4 Use the Solver to Derive Parametric CERs

After the historical data are entered, the Solveris run. The function of the Solver is to extract CERs,and to present a graphical and statistical evaluation of the results to assist the cost model designer inassessing the quality and validity of the CERs. The Solver computes the best CER it can fit throughthe historical data points, using successive optimizations and refinement of parameter influencecoefficients. With three or more historical data points, it can compute a 2nd order polynomial CER(although a control is provided to restrict it to linear CERs if desired). Other aspects of the Solveralgorithm can be controlled as well to help achieve the best (most reasonable) CERs.


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For each task, the Solver displays the historical cost data points in a graphics window and the CER isrepresented by a curve that passes through the data set, as shown in Figure 4. In addition to thisgraphical feedback, the Solver also displays statistics indicating the quality of the fit of the CERthrough the data set.ModelBuilderalso has a Parameter Correlation report which lists any parametersthat do not correlate, i.e., do not show a positive statistical trend with respect to any of the assignedtasks, and the CER Coefficient report lists the actual coefficients of the CERs computed for each

Parametric task.

Figure 4. The Solver extracts multivariable CERs from historical data

Another method of evaluating CER quality is through the Prediction Accuracy reports.ModelBuilderuses the validation method recommended by theDoD Parametric Estimating Handbookwherein theactual cost of past projects is compared to estimates generated using the CERs. The PredictionAccuracy reports show the percentage error between the actual costs and the CER predictions for eachtask in the database.

Step 5 Enter CERs for Fixed Cost, Level of Effort, and Explicit Formula Tasks


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Fixed Cost, Level of Effort, and Explicit Formula tasks allow you to enter CERs manually, rather thanusing the Solver to derive them from historical data. The process of entering known CERs variessomewhat depending on the task type.

For the Requirements Definition task, a fixed cost CER is defined by dragging and dropping costcategories from the Cost Category Catalog onto the Fixed Cost Detail tab. In this example, the Sr.

Engineerand Clerk labor categories were dragged onto the labor assignments tab for this task, andestimates of 26 and 8.5 hours respectively were entered, as shown in Figure 5. As a result, when thistask is used in a cost estimate, those labor hour estimates will be used.

Entering the CER for a Level of Effort task is similar to a Fixed Cost task, with the exception thatweekly costs are entered rather than fixed costs. The duration of a Level of Effort task is calculatedfrom the planned task dates entered intoEstimatorby the user.

Figure 5. Fixed cost CERs are entered by dragging and droppingcost categories

Explicit Formula tasks use CER formulas entered explicitly by the cost model developer to estimatelabor, material, and ODC. For example, a known CER could be entered to estimate the number oflabor hours based on one or more parameters. Explicit CER formulas can also include variablereferences that refer to the costs of other tasks in the cost model, so the cost of one task can becalculated from another. The user can also specify how the estimated costs are broken down (bypercent) into multiple labor, material, or ODC categories.

Drag

Drop


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Step 6 Review, Refine, and Validate the Cost Model

After the Solver is run for each parametric task, the correlation and prediction accuracy results arereviewed. Initially, one or more of the parameter assignments may not show positive correlation basedon the historical data, or the accuracy of some parametric CERs may be poorer than desired. Whenthis occurs, the following steps are commonly taken.

Parameter assignments may be removed from tasks where those parameters do not showpositive correlation as cost drivers.

New parameters may be identified and assigned to tasks in a process of refining CERprediction accuracy. Fortunately, the Solver makes it very easy to add new parameters andtest for correlation.

Some CER solutions may be manually reduced from 2nd order polynomials to linearrelationships if linear CERs provided more reasonable cost prediction characteristics.

Historical data points that appear to be significantly out of trend with respect to the other datapoints may be reviewed. After investigation, if these are determined to be influenced byunusual circumstances then they may be adjusted or eliminated from the historical data set in

accordance with the guidelines of the Parametric Estimating Handbook.

The determination of when a cost model is complete or validated is based on experience,judgement, and common sense. In general, a cost model should be refined until the following criteriaare met.

The quality of sample estimates it generates are considered to be at least as good as thoseobtained using the best manual methods (although in much less time and with much lesseffort using the cost model).

All logical parameter assignments have been tested and there are no other obvious ways toimprove the cost model.

The ease of achieving these criteria depends on many factors including the quality and quantity ofhistorical cost data, and the maturity and repeatability of the processes being modeled. No parametricmodeling application can extract well-behaved CERs from poorly-behaved or corrupted historicaldata. In other words, well-defined and controlled processes can be modeled with much better resultsthan processes influenced by random or poorly understood factors.

Step 7 Submit the Cost Model for Internal Approval

After the cost model is completed, it is normally submitted to company management for internalapproval for use in estimating. ModelBuilder facilitates this process by providing a complete set ofpreformatted reports that document every important detail of the cost model including tasks,parameters, historical data, CERs, parameter correlation, and CER accuracy statistics. A total of 23different reports can be printed for the cost model data package.

In addition, several sample cost estimates are typically prepared to evaluate the reasonableness of theresults. This is an important step, even if the CER accuracy statistics seem satisfactory.

The next section of this paper will describe the use ofEstimatorto create cost estimates using this costmodel.


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PRODUCING PROJECT COST ESTIMATES USING ESTIMATOR

Estimatortransforms the normally laborious and time-consuming process of producing cost estimatesinto a simple point and click process. With the industrys most advanced graphical interface forparametric cost estimating, it can significantly reduce estimate development and evaluation costs andassociated cycle time while providing consistently high-quality cost estimates. Some of the elements

that makeEstimatorso effective for estimating are:

A checklist format that helps makes selecting tasks and entering parameters quick and easy.

Point and click importing of bid rates.

Automatic material and ODC escalation adjustments.

Continuous display of cost estimates while tasks are selected and parameters are entered.

Flexibility to add cost elements not included in the cost model.

The capability for quick and easy sensitivity and what-if analyses.

A wide range of charts and graphs to help the cost estimator assess spending profiles and

resource requirements. A comprehensive set of reports that fully document the estimate and its basis (i.e., rationale).

Estimatorcan use anyModelBuildercost model as the basis of an estimate. For example, you couldhave a family of cost models for different types of projects, processes, or services, and useEstimatorto generate estimates with any or all of them.Estimatorcan read the contents of a ModelBuildercostmodel but cannot edit it.

Figure 6 shows the main window ofEstimatorupon starting the program. The main features will beillustrated as the process of creating a sample estimate is described.

Step 1 Start a New Cost Estimate

The first step is to start a new cost estimate. This is done by selecting New under the File menu, or bysimply clicking on the New Estimate speedbutton. Every cost estimate includes summary informationsuch as the name of the project, customer, estimator, and a brief project description. Figure 7 showsthe Project Information dialog box, which opens automatically upon starting a new cost estimate.Some sample summary information has been entered for this example. Notice that relevant data suchas the WBS item number, project and proposal numbers, departmental codes, etc. can be entered andsaved with the estimate, although this information is optional. Summary information can also beimported from another estimate; an option that saves time if several related estimates are being madeon the same project.

The button on the lower left corner of the Project Information dialog box can be used to enter a briefrsumof the estimators qualifications. This information adds credibility to a cost estimate and istypically required for U.S. Government contract proposals.


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Figure 6. Features of the Estimator main window

Figure 7. Summary information about the project being estimated is entered

on the Project Informationdialog box.

Task ListPanel

Task DirectCost Display

Task DetailSection

Main Function Buttons

ProjectSummarySection

Speedbuttons

Parameter

List


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When the Project Information dialog box is closed, the project name, task name, project number,proposal number, WBS item number, option code, and start date are displayed in the Project Summarysection of the main window. This provides a continuous display of this reference information while anestimate is being prepared.

Step 2 Select the Cost Model for the Estimate

The next step is to select aModelBuildercost model to use as the basis of the estimate.Estimatorwilluse the task and CER data in the cost model to display information and prompts to the user andcompute the task cost estimates. The Cost Model button on the main window opens a dialog box thatallows you to browse the computer hard drive (or the network) for the cost model file. For thisexample, the cost model described earlier in this paper was selected.

Upon reading the cost model file,Estimatordisplays the Task Liston the main window as shown inFigure 6. While this list resembles the one displayed in ModelBuilder, a checkbox is now includednext to each task name inEstimator. This is how individual tasks are selected for inclusion in the cost

estimate. The checkbox turns a task on or off. The default state for all tasks upon starting a new costestimate is deactivated(unchecked), and each task that is appropriate for the project being estimatedmust be deliberately activated(checked). In so doing, the user can customize the task selection of eachestimate to suit the project requirements.

The main window also displays the description of each task when its name is selected in the Task List.This helps the user clearly understand the essence of each task, so the appropriate tasks can beactivated for the project. Estimator also displays the Task Type so the user knows what type ofinformation is needed to generate the estimate (i.e., task start and end dates, parameter values).

Step 3 Activate Tasks

The next step is to activate the tasks that are appropriate for the project being estimated by clicking thecheckboxes next to the respective task names. As each one is activated,Estimatorwill prompt the userto enter associated task dates and parameter values.

For example, when the Requirements Developmenttask is activated, Estimator prompts the user toenter the estimated start and end dates of this task. Since it is a Fixed Costtask, parameter values arenot needed to estimate the cost. The cost model contains the fixed cost relationship that allowsEstimatorto estimate 34.5 hours of labor for this task as shown in Figure 8. It also knows that this isbroken down into 26 hours ofSr. Engineerlabor and 8.5 hours ofClerklabor (although only the totalof 34.5 hours is displayed in the Task Direct Costsection).

To compute the direct cost in dollars,Estimatorneeds to know the hourly rate of each labor category.In general, labor rates effective at the midpoint date of the project period would be used. Thisinformation is entered on theRates dialog box shown in Figure 9, which is opened by clicking theRates button on the main window. It allows the hourly labor rate of each labor category used in thecost model to be entered. It also allows you to enter the burden rates that should be applied to labor,material, and ODC, in addition to other overhead, general and administrative (G&A) rates, and fee ifapplicable. The rates on this dialog box can also be imported from rate files on your hard drive ornetwork.


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Figure 8. Estimator main window with one task activated.

Figure 9. Bid rates are entered on the Ratesdialog box.


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When theRates dialog box is closed, Estimator automatically updates the cost calculation for eachtask and displays burdened labor dollars and task total direct cost. The total cost estimate includingoverhead, G&A, and fee is displayed in the status bar in the bottom right corner of the main window.

When a Level of Effort task is activated, Estimatorprompts the user to enter the estimated start andend dates of the task. Since the cost estimate for a Level of Effort task is based on the duration of the

task, no parameter values are needed to estimate the cost.

When a Parametric task is activated,Estimatordisplays the parameters associated with that task in theParameters table. Figure 10 shows the main window with theDesign Layouttask activated. The tasktype is displayed and the user is prompted to enter the task start and end dates, as well as the values ofseveral parameters needed to compute the estimate for this task. In this example, the parameter valueshave been entered andEstimatorhas calculated the cost of the task and added it to the estimate total.

Figure 10. Estimator displays relevant parameters

when Parametrictasks are activated.

As shown in Figure 10, parameters are not limited to simple numerical values. They may be gradelists of discrete values that represent a cost or complexity factor. They can also be scales, or computedvalues based on a formula defined by the cost model designer.Estimatorwill display a drop-down listof valid options for parameters that have discrete values.


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When anExplicit Formula task2 is activated,Estimatordisplays parameters associated with that task(if any) in the Parameters table. Figure 11 shows the main window with the Design Review taskactivated and selected. The task type is displayed and the user is prompted to enter the task start andend dates, as well as an estimate of theNew Design Fraction, a parameter that relates to the fraction ofthe pump design that is new versus design adapted from a previous pump. In this case Estimatorcalculates the estimate of 56 labor hours based on the CER in the cost model.

Figure 11. Estimator displays relevant parameters

when Explicit Formulatasks are activated.

Estimatorkeeps track of all parameter values globally, and each parameter has a single unique valuefor the entire cost estimate, even if it is used in multiple tasks. Therefore, if you change the value of aparameter,Estimatorwill automatically change its value accordingly in all tasks where it is used.

When aManual Entry task is activated,Estimatoractivates a dialog box that allows the user to enterlabor, material, and ODC estimates manually for that task. Figure 12 shows theManual Entry Detaildialog box with direct labor estimates entered by labor category for the Bearing Life task. When thedialog box is closed,Estimatoruses those estimates for the task and adds them to the estimate total.

2Explicit Formula tasks may have parameters like Parametric tasks. However, unlike a Parametric task,which has a CER derived by ModelBuilders Solver from historical project data, the CER for an ExplicitFormula task is defined explicitly by the cost model developer.


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Figure 12. Estimates for Manual Entrytasks are entered

on the Manual Entry Detaildialog box.

Summary tasks are shown in gray italic text in the Task List, indicating that they cannot be activated.The cost of a Summary task is simply the sum of all the activated tasks under it in the task hierarchy.Clicking on a Summary task name displays the cost of all of its activated subtasks in the Task DirectCost section.

The user can continue to activate tasks and enter parameter information as needed to compile acomplete cost estimate for a project. The cost estimate may include all the tasks in the Task List, or asubset thereof. At any time, the user can view a summary breakdown of the costs by clicking on theCost Summary button. This displays the Cost Estimate Summary window (see Figure 13) which liststhe cost breakdown by category.

Step 4 Review Costs and Spreads

After all the appropriate tasks are activated and relevant parameter values have been entered, the costestimate should be reviewed for reasonableness. Estimator provides several ways of reviewing thecost estimate results, including:

Direct cost by task Direct cost can be viewed on a task-by-task basis by selecting each activated task in theTask List and viewing cost in the Task Direct Costsection of the main window.

Total estimated cost including burden, overhead, G&A, and fee The total estimated cost is displayed in the bottom right hand corner of the main window.

This display can also be changed to total labor hours, total labor cost ($), total materialcost ($), or total other direct cost ($).

Total cost by category The total cost by labor, material, and ODC category can be displayed using the CostSummary button, which opens the Cost Estimate Summary window.

Cost by category and by month The cost on a month-by-month basis over the duration of the project can be displayedusing the charting features ofEstimator.


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Figure 13. A summary of the project cost estimate is shown in the

Cost Estimate Summarywindow.

The total cost is frequently the main objective of a cost estimate. However, the cost profile over the

duration of the project is also frequently an important consideration. Estimator provides charts ofmonth-by-month cost during the proposed project to help the cost user and management evaluate thereasonableness of the estimate and assess staffing and other resource requirements.

Figure 14 shows a sample chart ofSr. Engineerlabor hours plotted by calendar month as a bar graphwith the cumulative labor hours overlaid. Similar charts can also be generated for any material orODC category, or total cost by month.

These are powerful analysis capabilities that help the user provide better cost estimates and support theapplication of government contracting initiative such as Design-to-Cost and Cost As an IndependentVariable (CAIV). Task, parameter, and date changes can be made rapidly and evaluated easily andquickly so cost estimates can be optimized to best suit the project requirements and cost constraints.


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Figure 14. Cost can be plotted by month in any category

to assess resource requirements and cost profiles.

Step 5 Print Reports

When the cost estimate refinement and review is completed, a complete set of reports can begenerated in just a few mouse clicks. First, the Reports dialog box (see Figure 15) is opened byclicking on the Reports button on the main window. This dialog box displays a list of thepreformatted reports that are available for viewing and printing. Click the Select All button to selectall the report checkboxes, then click the View/Print button.

Estimator displays each report in sequence in the Report Viewer. Figure 16 shows the first report(Schedule1) which is a summary sheet for the estimate that includes a description of the work beingestimated, the estimating organization, rationale statement, cost model being used, cost estimatorsname and resume, etc. The logo for all reports can be specified to provide a customized appearance.

Other reports document details such as tasks, parameters, bid rates, cost breakdown by task andcategory, cost summary, etc. Collectively, these reports provide a complete set of rationale for eachcost estimate at the click of a mouse. This information, along with a copy of the cost model datapackage, comprises a cost proposal that is able to support a detailed audit. In fact, this estimating andrationale system has been examined by DCAA auditors and accepted in every case.


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Figure 15. Fifteen reports can be generated to document everykey detail of your cost estimate.

Figure 16. The Report Vieweris for browsing and printing any of

the 15 preformatted reports.


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CONCLUSIONS

ModelBuilderandEstimatorhave been created to make the development, validation, documentation,deployment, and maintenance of proprietary parametric cost estimating systems faster, easier, and lesscostly. Utilizing intuitive graphical user interfaces, they provide analysts and cost estimators with a setof practical, yet powerful tools for developing and using proprietary parametric cost models. As aresult, they facilitate the use of parametric estimating techniques by companies in a broad range of

fields and industries.

This paper provides a brief overview of the features and use of these products. Some features andcapabilities are only touched upon or are not described at all due to space limitations. For moreinformation, contact NHYSOFT at www.nhysoft.com.

REFERENCES

DoD Parametric Cost Estimating Initiative Working Group, 1999, Parametric Estimating Hand-book, Second Edition.

BIOGRAPHY

John P. Harrell is the President of NHYSOFT, Inc., and principle architect of the ModelBuilderandEstimatorsoftware products for parametric cost estimating. He has a Bachelors Degree in MechanicalEngineering from Louisiana State University (1977) and a Masters Degree in Engineering from theUniversity of California at Los Angeles (1980). He is a member of the International Society ofParametric Analysts (ISPA), the Society of Cost Estimating and Analysis (SCEA), the AmericanInstitute of Aeronautics and Astronautics (AIAA), and has 23 years experience in the aerospaceindustry. As a mechanical engineer, Mr. Harrell has extensive experience in product design anddevelopment, project management, and cost estimation including experience developing and usingcost estimating systems for government contract cost proposals. Mr. Harrells experiences in projectcost estimating led him to the conclusion that special-purpose software tools were needed to facilitate

the development, validation, and use of proprietary parametric cost models. Mr. Harrell begandevelopment ofModelBuilderandEstimatorin 1996 and NHYSOFT, Inc. was founded in 1999.

Mr. Harrell can be contacted at NHYSOFT, Inc., Mission Viejo, CA 92692. Phone: (949) 367-2911,Fax: (208) 279-7016, Email: jpharrrell@nhysoft.com.

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