Cost Estimating and Contract Pricing

Abstract

In the increasingly competitive and electronic business environment, cost estimation may embrace a business with the ability to make sound decisions related to the design, development and delivery of its products and services. The paper has analyzed growing importance of cost estimation and contract pricing in supply chain management. In the light of prior literature and examples, the paper has developed a thorough understanding of effective techniques that can be adopted to create a valuable network of supply chain activities. Research showed that increasing atmosphere of market competition and outsourcing practices have urged companies to identify and incorporate effective cost management techniques that can allow them to earn sustainable business profits. However, there are contemporary and more advanced approaches to swiftly and precisely estimate the cost of product life cycle. Similarly, an increased emphasis has been put on the appropriate pricing analysis that may add value to the effectiveness of supply chain management. Furthermore, research found that a company should choose an appropriate contract pricing technique, which is competent and well accommodated with the product and business procedures. Nonetheless, an accurate and reliable arrangement of pricing may allow the company to increase the efficiency of supply chain activities.

Key Words: Cost estimation, contract pricing, supply chain management, market competition, product life cycle

Abstractii

Thesis Statement1

Introduction1

Discussion1

Cost Estimation2

Cost Estimation and Supply Chain2

Methods of Cost Estimation4

Parametric Analysis4

Technical Consensus5

Historical/Analogy6

Weighted Average7

Engineering Estimates7

Contract Pricing8

Contract Pricing and Supply Chain8

Contract Pricing Approaches9

Cost Plus Award Fee (CPAF)9

Firm-Fixed Price (FFP)10

Contract Pricing Strategies10

The Best Value Strategy10

The Lowest Price Technically Accepted (LPTA)12

Conclusion13

References14

Bibliography17

Appendix18

Cost Estimating and Contract Pricing

Thesis Statement

An appropriate cost estimation technique and meticulous price analysis may add value to the effectiveness of supply chain management.

Introduction

The research paper undertakes a close examination of cost estimation and contract pricing concepts in the discipline of supply chain management. In order to draw a clear understanding of the subject matter, the research paper evaluates various approaches to cost estimation that may have significant impact on the product life cycle. Moreover, the paper compares and contrasts various pricing arrangements that are usually adopted by companies either in a private or public sector.

In the light of examples, the paper discusses important aspects of these techniques that may improve the efficiency of supply chain activities and ensure business profits. However, the paper also considers associated potential risk factors that may damage business performance, if not properly catered. Finally, the paper summarizes research findings based on the developed understanding of the subject matter.

Discussion

With the advent of globalization and technological advancements, business arena has undergone a transformational and major structural change from conventional businesses to growing trend of e-businesses and virtual offices. As companies are expanding their network across transnational boundaries, they are exposed to increased risk, uncertainty and an element of radical change (Garrett, 2008). On one hand, business expansion either on the national or international scale requires businesses to enhance the efficiency of their supply chain network. On the other hand, it creates the challenge of cost estimation and contract pricing for the seller, as well as the ...