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Understanding risk-adjusted cost

Cost Estimating

Cost estimating is crucial in project pricing, adeptly balancing competitiveness and profitability. By incorporating risk assessments and confidence scoring, businesses can calculate risk-adjusted costs, facilitating informed statements like, "With 80% confidence, we can deliver this project for less than $1.2M." Comprehending risk-adjusted costs also impacts risk mitigation strategies and contract terms, enabling companies to determine the most suitable approach, such as time and materials (T&M) or fixed-price agreements, ultimately enhancing project success and customer satisfaction.

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Improve Efficiency with Workflow

To adhere to RFP deadlines, implementing workflows streamlines the process of swiftly obtaining estimating inputs and approvals from various departments, ensuring efficiency and timely responses.


Leverage your Data with powerful Data Science

Leverage your data sitting in e.g. your ERP system to efficiently and accurately derive accurate estimates. The system will not only derive a unit cost, but also the confidence in that estimate, so the user can take appropriate actions in the case the confidence is low, especially for higher value resources.


Easy-to-Use Tool for Users to Estimate and Plan

It is critical that the end-user has a tool that aid the process to simply and efficiently estimate various types of cost. MS Excel has a lot of features that users love in terms of flexibility, so we like to retain that flexibility, but close the door on some of the weaknesses of Excel, which is the lack of control.


Compliant Bids with Basis of Estimates

When submitting estimates to clients, it is not just about the number, it is critical to be able to substantiate and justify why the costs are the way they are. We provide traceability to the source documents used and the ability to write up justifications (Basis of estimates). This allows our clients to be compliant with government regulations, such as the US FAR.


Quantify Uncertainty with Risk-Adjusted Cost

There is a vast difference between $1M +/- 5% and $1M +/- 50%. One might represent buying a component with an already established contract and the other might be building a new piece of software. During estimating, we need to know the difference. This is why we talk about risk-adjusted cost. The risk adjusted cost, gives us the ability to say with 80% probability I can deliver the project below $2.3M cost. Risk-adjusted cost is key when determining price point and contract type. 


Use Top-Down Planning to Ensure Competitive Bid 

Comparing Design-to-Cost targets with bottom-up estimates rapidly highlights areas for discussion and help align sales and delivery expectations.

Building your Cost Model

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Material Cost Estimating

Leverage your historical data in e.g. SAP ERP to cost large BOMs for proposals within minutes. Users can import BOMs from PLM, ERP or Excel and create Proposal BOMs. These Proposal BOMs can be automatically costed using powerful estimating algorithms that calculate both unit cost as well as confidence. The user then refine those estimates in a powerful estimating cockpit. Twenty5 can even integrate with sourcing software such as SAP Ariba and Coupa to send sourcing requests for certain components that require an updated quote. Once all parts are estimated, Twenty5 provides a fully costed BOM. 

Labor Cost Estimating

Twenty5 offers a state-of-the-art user interface for estimating labor in a variety of ways. It can be as simple as 0.5 FTE between January 6th and March 15th using a flat distribution or a sophisticated as a formula, which calculates the effort based on several parameters, some of which are input by the user and others derived based on other aspects. Efforts can be spread automatically using curves or manually on a monthly or weekly basis. We can even combine the curves with manual planning by first spreading them using a curve and then making manual adjustments. Different resources can have different work schedules and work calendars, to adjust for hour per week and holidays. 

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Indirect Cost

Connecting people around a single source of truth and incorporating workflow processes are crucial when scoping and estimating a project. This approach ensures that all team members access consistent, accurate information, fostering collaboration and reducing misunderstandings. Streamlined workflows guide the team through each phase, maintaining accountability, and promoting efficient communication. Ultimately, this unified method supports informed decision-making, optimizes resource allocation, and increases the likelihood of project success.

Top Down Planning to Set Yourself Up For Success

Adopting a top-down planning approach that incorporates "Price to Win" and "Design to Cost" strategies is vital when scoping and estimating a project. This method aligns the project's objectives with budget constraints and client expectations, ensuring competitiveness in the market. By focusing on these strategies, teams can identify cost-saving opportunities and make informed decisions, ultimately delivering a high-quality project that meets or exceeds the client's requirements while staying within budgetary constraints.

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Designed on SAP HANA for Organizations Running SAP

Our solution takes full advantage of SAP's robust HANA database. It is natively integrated with SAP to reuse master data already maintained in SAP, such as resource pools, BOMs, items, routings, vendors, etc. At the same time, we leverage and reference your rich transaction histories sitting in SAP, such as quotes, contracts, purchase orders, and production orders, to anchor estimates in reality.

Even long-time SAP customers still have non-SAP data sources critical for the bid & proposal process, such as DOORS, Primavera, and Salesforce. Don't worry; we've got you covered. 

We have added flexibility to fit your specific landscape and security requirements regarding deployment. The solution is architected to allow for several deployment scenarios, such as directly in your S/4 HANA instance, in an on-premise HANA sidecar, or the cloud, all the time being ITAR compliant.

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Ready to see a demo or speak to an expert to learn more?

Complete the form to schedule a time to speak with our team.  We will customize a demo to your specific needs and interests.  We look forward to helping you win more profitable bids.

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