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Twenty5 for Aerospace & Defense Part 3: Introducing iPE: Revolutionizing Estimation in Aerospace and Defense

Greetings, fellow cost estimating enthusiasts! I'm Allen Azar, a Solution Architect with Twenty5 LLC, specializing in cost and price estimating for Aerospace and Defense. Today, I'm thrilled to share with you the leap forward, after recapping Pricing Strategies in Part 2, that's set to redefine the way we approach estimating costs and managing risks in complex projects: the Intelligent Pricing Engine, or iPE. 

 

1. Streamlining Overheads and Factors within the Consolidated Bill of Materials (CBoM) 

At the heart of iPE lies a sophisticated feature known as the Consolidated Bill of Materials (CBoM). In estimating, precision is paramount, and iPE excels by leveraging labor rates and burden factors such as cost estimating relationships (CERs) and hours estimating relationships (HERS) within the Basis of Estimate (BoE). By applying estimated overheads, factors, CERS and HERS to required component material purchase cost and labor hours, iPE delivers comprehensive insights into procurement and production costs. What sets iPE apart is its ability to tailor overheads, factors and costing relationships according to specific business units or plants, calendar or fiscal years, and even at part/commodity or labor cost code level, with these calculations utilizing sophisticated formula or index-based approaches. The result? A meticulously crafted estimate, with factors expressed as hours:hours, hours:cost or cost:cost relationships, using centrally or AI-based factors, percentages or rates, offering a holistic view of project costs. 

 

2. Empowering Risk Management with Robust Modules 

In the realm of project estimation, risk lurks around every corner. iPE acknowledges this reality and confronts it head-on with a robust Risk Management module. This feature empowers users to identify potential risks across multiple facets of a proposal, assigning cost impacts (via user input or from a formula/menu selection) and probabilities to strategically place risks on a heatmap and calculate reserve positions. By integrating risk management seamlessly into the estimation process, iPE ensures that uncertainties are not just acknowledged but actively mitigated, fostering confidence and resilience in project planning. 

Then during the project execution life-cycle risk reserves are often converted into mitigation plans, project changes or funds for changes. IPE keeps track of this during the project delivery life-cycle comparing the time-phased risk profile with the risk reserve and funds released for risk mitigations and project changes. 

 

3. Unraveling Complexity with Advanced Estimating Methods 

The data volumes and complexity of estimating costs across Engineering, Production, Procurement, Spares and Repair in Aerospace and Defense projects can be daunting. iPE rises to the challenge with its arsenal of advanced estimating methods. When it comes to purchase parts, iPE employs a hierarchical approach to cost sources, scoring relevance based on factors like source document age (pricing validity dates) and quantity variance. For example, unit cost typically rise with inflation over time, and would be higher when purchasing a smaller total quantity. Even in scenarios where cost sources fall outside contractual agreements, iPE doesn't falter. With tools like Scale, Power, Linear, and Total Curving, iPE adeptly extrapolates pricing, ensuring accuracy and reliability, even to the extent of analysing purchase history to derive power curve percentages.  

For manufactured parts, iPE incorporates routers, historical production data such as shop floor confirmations, learning curves, realization factors, set-up, run and machining times, and parametric estimating methods to project labor hours into the future with unprecedented precision, which are in turn either multiplied by forecast or forward negotiated labor rates for the contract or by today’s rates time an inflation-indexed escalation. 

For engineering hours, estimating methods vary from discrete/subjective input of hours or full-time equivalent resources, including three-point estimating, hours:hours cost estimating relationships such support labor resources such as supervisory or project leads, copying forward actual performance history adjusted by parameters such as complexity or location-specific efficiency factors, and upload from MS-Project or Primavera. Combined with the master set of labor cost rates, which can be in turn pulled directly from your SAP ERP system activity types, these estimating methods ensure the most accurate and confidence engineering estimates you can produce. 

Finally spares and repairs often require specialist estimating methods, in the case of repair and overhaul based on the receipt and induction of the actual part or assembly which is being repaired. The quotation is not firmed up until after the received part of assembly has been at least partially stripped down and inspected, so that a proper determination of work-scope, any service bulletins needed, and which sub-components need to be replaced or can be repaired, has been determined. 

 

In conclusion, iPE isn't just a tool; it's a paradigm shift in the world of estimation. By seamlessly integrating advanced features like the CBoM, robust risk management module, and cutting-edge estimating methods across Engineering, Production/Procurement, Spares and Repair, iPE equips Aerospace and Defense cost estimators with the tools they need to navigate complexity with confidence and precision. Join us as we embark on a journey towards a future where estimation isn't just a challenge to overcome but an opportunity to excel. Welcome to the era of Intelligent Pricing Engine. Welcome to iPE. 


Allen Azar, Solution Architect for Aerospace & Defense at Twenty5 LLC


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