composition of aggregate cost value for add/delete

[schickson]

Will someone please confirm that when determining the value of the added and the deleted work to be used in deriving the aggregate value for review and/or CCPD consideration; you're supposed to include the associated or estimated overhead, G&A, and profit/fee (here after referred to as OGP) applicable to the deleted work separately from the added work?

For example, if I am deleting $125K in direct material and labor, and adding $250K in direct material and labor, the aggregate amount is determined by calculating the OGP on the $125K (say another $100K) and then also calculating the OGP on the $250K (say another $200K) resulting in an aggregate change of $675K (AV 250+200-125-100=), which requires CCPD.

The reason is probably obvious, but if you simply combine the add and deleted direct costs, and then add the associated OGP to the overall net, the aggregate value can be different than if you calculate it the first way (given an overall net increase). Examples:

OGP BASED ON OVERALL NET:

Added: $250K

Deleted:$125K

NET: $125K

OGP: $100K

TOTAL: $225K

Net Change: $225K

Aggregate value: $600K (250+225-125)

CCPD NOT required

OGP BASED ON EACH COMPONENT

Added: $450K (250 + 200)

Deleted:$225K (125 + 100)

NET: $225K

OGP: (included above)

TOTAL: $225K

Net Change: $225K

Aggregate value: $675K (450+225)

CCPD REQUIRED

Thanks.

[Guest Vern Edwards]

I hereby confirm that when determining the value of the added and the deleted work to be used in deriving the aggregate value for review and/or CCPD consideration, you are supposed to include the associated or estimated overhead, G&A, and profit/fee applicable to the deleted work separately from the added work.

[formerfed]

but if you simply combine the add and deleted direct costs, and then add the associated OGP to the overall net, the aggregate value can be different

Of course it will be diiferent and it will be wrong as well. The first way you described it in the narrative is the proper way.

[joel hoffman]

Will someone please confirm that when determining the value of the added and the deleted work to be used in deriving the aggregate value for review and/or CCPD consideration; you're supposed to include the associated or estimated overhead, G&A, and profit/fee (here after referred to as OGP) applicable to the deleted work separately from the added work?

For example, if I am deleting $125K in direct material and labor, and adding $250K in direct material and labor, the aggregate amount is determined by calculating the OGP on the $125K (say another $100K) and then also calculating the OGP on the $250K (say another $200K) resulting in an aggregate change of $675K (AV 250+200-125-100=), which requires CCPD.

The reason is probably obvious, but if you simply combine the add and deleted direct costs, and then add the associated OGP to the overall net, the aggregate value can be different than if you calculate it the first way (given an overall net increase). Examples:

OGP BASED ON OVERALL NET:

Added: $250K

Deleted:$125K

NET: $125K

OGP: $100K

TOTAL: $225K

Net Change: $225K

Aggregate value: $600K (250+225-125)

CCPD NOT required

OGP BASED ON EACH COMPONENT

Added: $450K (250 + 200)

Deleted:$225K (125 + 100)

NET: $225K

OGP: (included above)

TOTAL: $225K

Net Change: $225K

Aggregate value: $675K (450+225)

CCPD REQUIRED

Thanks.

From the Merriam-Webste'sr On-line Dictionary:

Main Entry: 1val?ue

Pronunciation: \ˈval-(ˌ)y?\

Function: noun

Etymology: Middle English, worth, high quality, from Anglo-French, from Vulgar Latin *valuta, from feminine of *valutus, past participle of Latin valēre to be of worth, be strong — more at wield

Date: 14th century

1 : a fair return or equivalent in goods, services, or money for something exchanged

2 : the monetary worth of something : market price

The worth or price of an item doesn't just include the direct cost. It includes all costs and markup - the price one would charge or pay - assuming, of course that the seller isnt discounting the item. For purposes of cost based modification pricing, it would likely include all costs and markup

[schickson]

Thanks for the confirmation. It will help in convincing my customer and my boss that I know what I'm doing :P

[Guest Vern Edwards]

I didn't confirm that you know what you're doing. Heck, I can't confirm that I know what I'm doing.