One of the tenets of creating data driven cost estimates is to use reliable historical or actual cost source data that is traceable back to a corporate business system to substantiate the basis of estimate. For contractors that build products for a government customer, proposal teams typically create bills of material (BOMs) to estimate the likely material or purchased part requirements. That means they need to pull relevant source data from one or more business systems such as accounting, purchasing, material management, or manufacturing/enterprise resource planning (M/ERP).
A common challenge for proposal teams is gaining access to the corporate business system source data they need to produce their cost estimates and substantiate their basis of estimate. The other challenge is the source data often isn’t organized in a way they can readily use it in their cost estimates – it may be necessary to group, filter, or sort the source data differently to align with how they are developing their cost estimate.
This blog discusses how ProjStream’s BOEMax proposal software master parts and assemblies list and hierarchical bills of material (BOMs) can help to create a set of reliable source data for proposal teams. The objective is to ensure the data they need is readily available so they can quickly create their project BOMs and material cost estimates with full traceability. The advantage with BOEMax is that proposal teams can organize their complete set of cost estimate data along with the basis of estimate narrative information in a single database.
Steps for Using BOEMax Bills of Material
Once a proposal team creates their proposal project in BOEMax, they have the option of creating related BOMs to develop their material cost estimates.
Step 1. Define the proposal project’s BOMs.
Bills of material in BOEMax are project specific. Proposal teams can create one or more named BOMs for a project to match how they want to organize and maintain the data. For example, they may want to define separate BOMs to reflect the major deliverables, major subcontractors, or contact options.
As needed, proposal teams can create project specific user defined fields for their BOMs. For example, they may want to add an attribute field such as a material category or a flag field to identify critical material or government furnished items useful for sorting or filtering data.
Step 2. Populate the data in the project’s BOMs.
A BOM can be made up of a list of parts and assemblies. The basic information needed to build the BOM is a part number or reference code, description, manufacturer, unit of measure, quantity, and unit price. An assembly groups a set of individual parts into a hierarchical structure to create a larger material component. This is illustrated below.
When clients first install BOEMax, we recommend they import the source part and assembly data from the applicable business system to populate a project’s BOMs. This is a basic spreadsheet of data extracted from the other system. We often help our clients establish an import template for the BOM data so proposal teams can import validated source data as they need it.
Once the data is imported, proposal teams simply identify the quantities of parts or assemblies they need for their proposal. What’s nice about using assemblies is proposal teams can enter the number of assemblies they need and the number of individual parts in the assembly hierarchy are automatically updated to determine the assembly’s total direct cost.
This import process builds up the available source data in the system level BOEMax master parts and assemblies list all projects share. This master list and the project specific BOMs are related. When a proposal team adds or imports a part or assembly into a project BOM that does not exist in the master list, BOEMax automatically updates the master list.
The benefit is other proposal teams can simply select the parts and assemblies they need from the system level data already established in BOEMax to quickly build their project BOMs. The other benefit is the master parts and assemblies list can be used to establish a Process Library in BOEMax. This is another time saver for proposal teams because they can quickly create their cost estimates from repeatable process templates. These templates define a set of common tasks along with labor, material, and other resource requirements that are based on historical performance and actual cost data useful for substantiating the basis of estimate.
- The four primary fields for the master parts and assemblies list in BOEMax include the part number, description, manufacturer, and unit of measure. To reduce the likelihood of duplicate records in BOEMax, consider normalizing data you are importing into BOEMax from other systems. For example, one system may use a unit of measure named “Each” while another uses “EA.” The same applies to manufacturer names.
- Determine a regular data maintenance cycle for the system level master parts and assemblies list so it reflects current prices. You may also need to update the list to reflect new suppliers. How often you need to update the data is dependent on your business environment and type of materials or components. This ensures new proposal projects use the latest pricing data and approved suppliers.
Step 3. Create the material work package.
Once the BOMs are built, the rest of the process is easy. The proposal teams identify the work elements with material requirements. They define work packages with a start date and duration or end date to calculate the duration, and assign the Material assumption type. Planning ahead for the project’s execution phase, we recommend clients also assign the material Quantities earned value technique so they can enter the quantity earned in the BOM to status the work package.
Step 4. Assign a material resource to the work package.
Material resources are defined in the project’s resource structure and are assigned the material element of cost category. These can be as detailed as needed for the proposal. It could be one summary material resource or a hierarchy of different material categories specific to your business environment – the lowest level of resources defined in the structure are assigned to the work package. The overhead rates for the material resources are defined in the project’s related rate structure.
Step 5. Select the parts and assemblies from the BOM to automatically calculate the total cost.
In the main BOEMax Estimate window, the proposal team simply clicks in the work package resource cell to display the Resource BOM window and select the parts or assemblies for the work effort. This determines the total direct cost for the material resource.
A cost estimator simply selects the material parts or components from the project’s bill of material for the work element
Overhead rates are automatically applied to calculate the total cost. The BOMs are also automatically updated with the WBS element and work package assignment for complete traceability. This is illustrated above in Step 2.
Step 6. Add documentation.
A previous blog, BOEMax Tech Tips: Documenting Supplier BOEs discussed how once the proposal project’s BOMs were created, proposal teams could add documentation about the parts or assemblies such as details about the pricing, bidding information from suppliers, selection process, and any additional information about the part or component. This documentation is automatically included in the standard BOEMax Cost Summary Report that can be used for a proposal's cost volume submission.
Step 7. Produce the Cost Summary Report.
When the proposal team produces their Cost Summary Report for submission to the customer, the report includes the BOM content for full traceability. The data can be segregated to identify the list of suppliers, work elements with material assignments, and list of parts and component details for each BOM.
Leveraging the Proposal BOMs after Contract Award
Another benefit of using the BOMs in BOEMax is that once the contract is awarded, project control teams can import the BOEMax proposal project, including the BOMs, into ProjStream’s MaxTeam cost management software to establish the budget baseline for the project’s execution phase. The project control teams can then use the project’s BOMs to enter the quantity earned to calculate earned value for the material work packages. They can also enter the actual quantity and unit price to calculate material price and usage variances.
Interested in seeing BOEMax in action?
Call us today to see how ProjStream’s tools can help establish a database of reliable historical and actual cost source data so proposal teams can easily create data driven cost estimates with full traceability and substantiate their BOEs.
Updated September 25, 2020