In regulated industries like Aerospace & Defense, ensuring compliance in the Basis of Estimates (BOE) is critical to project success. The BOE is a detailed document that explains the rationale behind the cost estimates, including methodologies, assumptions, and data sources. Properly managing BOE compliance can mitigate risks, enhance transparency, and increase stakeholder confidence. Here are four strategies to ensure compliance in your Basis of Estimates:
1. Establish Clear Standards and Guidelines
To ensure compliance, it's essential to establish clear standards and guidelines for creating and maintaining the Basis of Estimates. These guidelines should define the necessary components of a BOE, such as the cost elements, assumptions, data sources such as your SAP ERP system sources for purchase and production history, policies and rules for calculation of rates and factors such as escalation or overhead rates, and costing and risk management methodologies. Providing a standardized template approach helps ensure consistency across your estimates, making it easier to verify compliance and identify discrepancies.
2. Leverage Advanced Estimating Software
BOE cost estimating is a very data intensive process. Tier-1 Aerospace & Defense firms would typical cost estimate projects with several hundred end items, bills of material (BOMs) contains tens of thousands of parts, and against purchasing and production histories running to millions of transactions. Advanced estimating software will significantly enhance compliance by automating most aspects of the BOE process. Not only does this improve your efficiency and accuracy, it facilitates compliance by showing the regulator how you consistently work. BOE cost estimating tools like Twenty5's intelligent pricing and estimating (iPE) software for Aerospace & Defense firms using SAP can ensure that all necessary elements are included, calculations are accurate, and data is sourced correctly. This software comes with built-in compliance checks, which can alert users to potential issues before they become significant problems. Additionally, these tools maintain an audit trail, providing transparency and traceability for all estimates.
3. Conduct Regular Training and Certification
Regular training and certification programs for your estimating team are crucial to maintaining high compliance standards. These programs should cover the latest industry standards, regulatory requirements, and best practices for BOE preparation. Certification can ensure that all team members have a thorough understanding of compliance requirements and are equipped to create accurate, reliable estimates.
4. Implement a Rigorous Review, Approval and Documentation Process
A thorough review and approval process is essential to ensuring BOE compliance. This process should involve multiple levels of scrutiny, including peer reviews, management reviews, and independent audits. Each review stage should verify that the estimate meets all established standards and guidelines and that any assumptions or methodologies used are reasonable and well-documented. An approval workflow that includes signoffs from key stakeholders can provide an additional layer of accountability. Most BOE tools, such as Twenty5's iPE BOE toolset, have built-in workflow engines to track and manage the approval and review cycles.
Detailed documentation is a cornerstone of compliance. Each BOE should include comprehensive documentation of all assumptions, methodologies, data sources, and calculations. This documentation should be clear and concise, making it easy for reviewers and auditors to understand the rationale behind the estimates. Maintaining a central repository for all BOE documentation can facilitate easy access and ensure that all relevant information is available for compliance checks.
Ensuring compliance in the Basis of Estimates is vital for project success and stakeholder confidence. By establishing clear standards, leveraging advanced software like Twenty5's intelligent pricing and estimating BOE toolset, conducting regular training, implementing rigorous review processes, and maintaining comprehensive documentation, you can create reliable, accurate estimates that meet all regulatory and organizational requirements such as DMCA/DCAA audit.
iPE from Twenty5 not only ensures compliance, but the built-in out of the box integration to SAP ERP, allows Aerospace & Defense firms running SAP ERP to automated significant sections of the BOE cost estimating process, from:
proposal bill of material explosion and consolidation across end items
lead-time offset scheduling, cash-flow analysis and escalation for inflation
multi-currency and multi-unit of measure conversion
searching for best-match or best-fit purchased part cost sources from your library of purchase orders, supplier contracts and quotations and manual cost estimates and cost/price analyses
averaging cost across production order confirmations for set-up vs processing times
calculation of rates, factors and indirect costs such as complexity, learning curve, realization, quantity adjustment or vendor decrement factors
These strategies and in particular using an advanced cost estimating tool like iPE from Twenty5 will not only enhance compliance, but will also improve the overall quality and reliability of your project estimates, leading to better project outcomes and the end of Govt. agency audit findings.
iPE from Twenty5 not only ensures compliance, but the built-in out of the box integration to SAP ERP, allows Aerospace & Defense firms running SAP ERP to automated significant sections of the BOE cost estimating process
Learn more from our co-founder, Richard Minney, on Ensuring Compliance in Basis of Estimates for Aerospace and Defense Firms with Twenty5 on our Youtube!
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