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Performing an Internal Audit on the Cost Estimating Process

G

goodnede

#1
Can someone give me some advice or direction on performing an internal audit on the cost estimating process? I understand the bid and proposal process and have audited it several times but I am not sure how to approach an audit on the actual "bid amount" and is it accurate.
 
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howste

Thaumaturge
Super Moderator
#2
Re: Cost Estimating Internal Audit

Can someone give me some advice or direction on performing an internal audit on the cost estimating process? I understand the bid and proposal process and have audited it several times but I am not sure how to approach an audit on the actual "bid amount" and is it accurate.
These should be determined by the process owner and the customer(s) of the process, not the auditor. Clause 8.2.3 of AS9100 requires that processes be monitored and/or measured, and they must demonstrate that process is achieving the planned results. You should be looking at the metrics they've established showing whether the process is effective or not. If it's not achieving the results they planned, then you should look at what they are doing about it.
 

John Broomfield

Staff member
Super Moderator
#3
Can someone give me some advice or direction on performing an internal audit on the cost estimating process? I understand the bid and proposal process and have audited it several times but I am not sure how to approach an audit on the actual "bid amount" and is it accurate.
Has this process has it been analyzed with the process and documented to the extent necessary for effective planning, operation and control?

Risk assessment may be key to successful estimating in your organization...

Estimating must result in the contracts you want.

Please do not audit this process until it has been analyzed and documented with or by the process owner...

When you have that please inform us of the objective of your audit...

Many thanks,

John
 
G

goodnede

#4
Docmented procedures on cost estimating from all of the functional areas were approved this year. A request was made to audit them and verify that they were being followed and accurate bids were being submitted. I have verified they follow the procedure they submitted and was approved but I couldn't say yes or no that the bids were accurate. The responses so far have cleared my vision a little and now I realize what I need to report......Thanks for your help.
 

John Broomfield

Staff member
Super Moderator
#5
Docmented procedures on cost estimating from all of the functional areas were approved this year. A request was made to audit them and verify that they were being followed and accurate bids were being submitted. I have verified they follow the procedure they submitted and was approved but I couldn't say yes or no that the bids were accurate. The responses so far have cleared my vision a little and now I realize what I need to report......Thanks for your help.
Sounds as if you are now ready to audit the estimating process (across the functional areas) for its effectiveness (see clause 4.1c). Ask the auditees how they know their bids are accurate if necessary to verify the effectiveness of your estimating process. As auditor you should not do this for them.
 

Sidney Vianna

Post Responsibly
Staff member
Admin
#6
Seems to me that this could get extremely convoluted in a second. Cost estimating is a sub-process of bidding, which is a sub-process of sales.

If we treat every sub-process as a macro process with performance indicator expectations, we can create a bureaucratic nightmare, with no end. An organization can have a very effective cost estimating activity and lose all bids. To me, it makes sense that the cost estimating is assessed as component of the sales process. If our sales goals are not being reached, it can be attributed to many factors, accuracy of cost estimation being one of them.

Be very careful if you expect to see KPI's (or any means of process effectiveness) for every micro or sub-process. You might doing your organization a disservice.
 

John Broomfield

Staff member
Super Moderator
#7
Seems to me that this could get extremely convoluted in a second. Cost estimating is a sub-process of bidding, which is a sub-process of sales.

If we treat every sub-process as a macro process with performance indicator expectations, we can create a bureaucratic nightmare, with no end. An organization can have a very effective cost estimating activity and lose all bids. To me, it makes sense that the cost estimating is assessed as component of the sales process. If our sales goals are not being reached, it can be attributed to many factors, accuracy of cost estimation being one of them.

Be very careful if you expect to see KPI's (or any means of process effectiveness) for every micro or sub-process. You might doing your organization a disservice.
Excellent point, it sounds almost as if the shortage of sales is being blamed on inaccurate estimating and instead of solving the problem management is asking for an audit...
 
C

Cornwap

#8
Hi

A different industry from yours, but when auditing the the estimating process in civil engineering companies the biggest issue I have found is the overall control of the data used to formulate the cost rather than the process itself.

Even with a centralised system quantity surveyors start creating their own spreadsheets "because they are easier to use" and nobody notices until it's too late. It might be different in aerospace but imho still worth a look.

Best regards
Phil
 
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