Faster & Better Ways to Determine an Engineering Labor Rate for Pre-Award Development Contract Cost Estimates
Models and Methods Track
The accuracy of cost estimates is an enduring issue in the DoD acquisition community. DoD programs too often overrun cost and are subsequently cancelled – a reality which puts the American warfighter at risk. One chief aspect of cost estimates with significant risk and uncertainty surrounding it is the labor rate used for contractor engineering in support of the specific project; if the wrong labor rate is used it can very detrimentally impact an entire estimate, thereby putting DoD programs at risk of cancellation. Cost estimators across the Government are continuously looking for ways to improve their methods of labor rate formulation. This paper discusses two methodologies for determining a more accurate engineering labor rate for use in estimates when the contractor is not yet determined, one using historical Contract Performance Report and another using Forward Pricing Rate Agreements of potential bidders. Ultimately the use of Forward Pricing Rate Agreements is endorsed and a newly developed statistical technique to analyze these agreements is presented. This new practice allows for up to 20% more accuracy when compared to other methods commonly in use today.
ESC/FMC: Air Force Electronics Systems Center Acquisition Cost Division
Michael Sweeney is currently an Operations Research Analyst with the Acquisition Cost Research, Studies and Training Branch at the Air Force Electronics Systems Center (ESC) at Hanscom AFB, MA. In his current position, Mr. Sweeney is charged with the development of cost estimates in support of the Airborne Warning and Control System (AWACS) program. Mr. Sweeney has also spent time working as a budget analyst supporting ESC staff. He has been recognized as the ESC Staff Civilian of the Year in 2009 and the ESC Acquisition Cost Analyst of the Year in 2010.
Mr. Sweeney received his BA in economics from Merrimack College summa cum laude.
Air Force Electronics Systems Center Acquisition Cost Division ESC/FMC
Mr. Fersch is currently the Chief of Acquisition Cost Research, Studies, and Training at the Air Force Electronics Systems Center (ESC). He is responsible for leading ESC cost research efforts, training the cost workforce, and leading special cost estimating projects in early cost estimating/development planning, wartime material support, and rapid cyber acquisitions. Additionally Mr. Fersch has been working to expand the understanding of cost estimating outside of the FM workforce and has been collaborating to develop cost training for the engineering, program management, and contracting communities. He is also the ESC lead for collaborative cost research and training efforts across the federal government. Previously, Mr. Fersch served with the Air Force Cost Analysis Agency (AFCAA), the Office of The Deputy Assistant Secretary of the Army for Cost and Economics (ODASA-CE) and as a defense contractor supporting the Secretary of Defense’s Business Initiative Council. Prior to his work with the DoD, Mr. Fersch ran a startup Internet Services Provider (ISP) that pioneered commercial wireless networking technology. Mr. Fersch has been recognized as the SAF/FMC & AFCAA Acquisition Cost Analyst of the Year, and by the Secretary of the Army and Under Secretary of Defense (AT&L) in 2004 for his efforts facilitating business transformation across DoD.
Mr. Fersch received his BS in economics & information technology from Virginia Tech, his MBA in strategy & international business from the University of Maryland and is graduating from the US Air War College this spring. He is a SCEA Certified Cost Estimator/Analyst (CCE/A).