CON 270 Exam 2

Question 1

Define Cost Realism Analysis and its elements.

Answer 1

The process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements:
Are realistic for the work to be performed.
Reflect a clear understanding of contract requirements; and
Are consistent with the unique methods of performances and materials described in the offeror’s proposal.
4402

Question 2

When shall cost realism analysis be performed?

Answer 2

shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror.
4402

Question 3

Can cost realism analysis be used on FFP contracts?

Answer 3

May also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts.
4402

Question 4

What is the clause that identifies Uncompensated overtime?

Answer 4

The CO shall insert the provision at 52.237-10,

Identification of Uncompensated Overtime, in all solicitations valued above the simplified acquisition threshold, for professional or technical services.
4402

Question 5

What is the cost realism analysis process?

Answer 5

1. Assure correct award criteria.
2. Obtain needed cost information.
3. Obtain other data needed for evaluation.
4. Obtain analysis support.
5. Identify costs/prices that are understated.
6. Estimate probable contract cost.
7. Use cost realism analysis in evaluation.
   4402

Question 6

What must state how the cost realism analysis will be used in the award decision?

Answer 6

The solicitation 4402

Question 7

What MUST cost reimbursement use to determine best value?

Answer 7

Probable cost estimate4402

Question 8

Can the KO adjust the price in a FFP contract?

Answer 8

No, Fixed Price - Must not adjust offered price. 4402

Question 9

What is the forty hour accounting system?

Answer 9

A labor accounting system that charges only forty hours per week per employee regardless of how many hours the employee works.

Some forty-hour accounting systems charge labor costs only to cost objectives worked on during the first eight hours of the work-day.

Others permit employees to select which cost objectives will be charged.

Either of the above methods for distributing labor costs provides the opportunity for employees or management to manipulate the allocation of labor costs and the indirect costs.
4402

Question 10

What is the full-time Accounting system?

Answer 10

Other contractors require their employees to charge for every hour worked.

The Defense Contract Audit Agency (DCAA) and others contend that total time accounting is required for compliance with FAR 31.201-4, Determining Allocability; CAS 401, Consistency in Estimating, Accumulating, and Reporting Costs; and CAS 418, Allocation of Direct and Indirect Costs.

4402

Question 11

What are the three (3) methods of calculating risk?

Answer 11

Sensitivity,
Monte Carlo,
Symmetric Approximation
4408

Question 12

What are the four basic types of risk?

Answer 12

Scope/Requirements Risk
  Cost Risk
  Schedule Risk
  Technical Risk
4408

Question 13

Describe the sensitivity analysis.

Answer 13

Used to figure out which items merit special management consideration. Works extremely well on scope/rqmts risks.

Measure how sensitive system cost is to variations in non-cost parameters
Method of testing assumptions by adjusting cost drivers to indicate magnitude of variations
Provides a quantitative assessment of potential changes to “cost drivers”
Select variables and adjust one at a time based on different assumptions
4408

Question 14

Describe the Monte Carlo.

Answer 14

Similar to symmetric approximation and is computer based.

Identify the areas of uncertainty
Develop the probability distribution for each area
Works well with cost risks. Especially suited for analyzing schedule risks. Many scheduling tools have included a “built-in” Monte Carlo simulation to analyze schedule risks and critical paths
Randomly sample from each element (iteratively) and develop a distribution of the total cost
4408

Question 15

Describe the Symmetric Approximation

Answer 15

Works extremely well when dealing with cost risk.

Identify the areas of uncertainty
Develop the probability distribution for each area
Calculate the mean and variance for each distribution
Estimate the mean and variance for the total cost
4408

Question 16

Describe the Uniform distribution

Answer 16

Every value between the minimum and the maximum has equal probability of occurring.

4408

Question 17

Describe the triangular distribution

Answer 17

The most likely represents the mode of the triangle (its peak), and in pricing, would typically be the value used in the government objective.

4408

Question 18

Describe the distinct distribution

Answer 18

Used where discrete (distinct) events or outcomes exist and the means are available to objectively or subjectively state the likelihood of each outcome occurring. The sum of the probabilities of the outcomes equals one.
4408

Question 19

Describe Normal distribution

Answer 19

Used when outcomes are equally likely to occur on either side of the average value; symmetric and continuous, unbounded, allowing for negative values. Need to be able to determine the mean and standard deviation.
4408

Question 20

Describe and differentiate the beta distribution

Answer 20

Similar to the normal distribution, but does not allow for negative cost, this continuous distribution can be symmetric or skewed. The PERT beta allows the user to specify minimum and maximum values, and the shape parameters.
4408

Question 21

How do you calculate Range

Answer 21

R=High-Low

4405

Question 22

As the cumulative quantity of units produced _______, the costs will decrease at a constant rate.

Answer 22

doubles

4405

Question 23

What basic theory related to improvement curves is preferred by the government?

Answer 23

Unit Improvement (Cost) Theory
Y = AX^B

Where:
Y = Unit cost of xth unit
X = Unit Number
A = Theoretical cost of first        unit
B = Constant

INCREASES IN THE RATE OF IMPROVEMENT WILL SIGNIFICANTLY DECREASE PRICE

4405

Question 24

What are the conditions that foster cost improvement?

Answer 24

Pressure to improve as a result of competition, desire to increase profit, improve ROI, etc.

Complex end item or process (more opportunities for improvement)

Stable design (with the exception of periodic changes for the purpose of reducing cost)

Continuous manufacturing process
4405

Question 25

What is the formula for determine the rate of improvement(ROI)?

Answer 25

ROI + Slope= 100% example ROI 30 the slope is 70

ROI=100-slope

When coming down a slope steeper is cheaper

The lower the slope, the steeper the curve, steeper is cheaper.

Remember steeper is cheaper when going down the curve

The lower the percentage the steeper the slope i.e. 70% is steeper than 90%
4405

Question 26

What is the order of preference is slope selection?

Answer 26

1. A curve developed from data pertaining to the production of the same product.
2. The median percentage from a group of curves for items having some similarity to the end item.
3. The median percentage from the product category in which the item would most likely be included.
   4405

Question 27

What is the target price?

Answer 27

Target Cost + Target Profit

4409

Question 28

What are the 3 types of Incentives?

Answer 28

Cost, Tech Perform, Schedule

4409

Question 29

What elements make up Target Cost?

Answer 29

Subtotal+G&A+FCCOM

4409

Question 30

Describe the CPIF for a basic contract review?

Answer 30

Turns into CPFF (100/0) with large underruns or overruns
Necessary elements
Target Cost
Target Fee
Contractor share % (under and over)
Maximum Fee
Minimum Fee
Range Incentive Effectiveness (RIE)
Not specified in contract, falls out
Between cost at max and min fee
4409

Question 31

Describe the FPIF for a basic contract review

Answer 31

Turns into FFP (0/100) with large overruns
Necessary elements
Target Cost
Target Profit
Contractor share % (under and over)
Ceiling Price
4409

Question 32

Describe the point of total assumption as an element of the contract.

Answer 32

it is the (cost) point at which the contractor totally assumes all (100%) responsibility for any additional cost growth.
4409

Question 33

Can you have more than one contract type within the same contract?

Answer 33

“Contracts negotiated under Part15 may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part”

A hybrid contract may allow the agency to achieve a better match between the requirement and how the work is priced.

A hybrid contract might support different types of incentive fees so that an agency may use incentive fee contracts with objective performance metrics whenever requirements can be measured objectively
4409