The Cost, Acquisition, Manufacturing and Estimating Log [The CAMEL]
Sometimes you feel like you’re lost in the desert…but you’re not alone!
The CAMEL [Season 1, Episode 3.]
Hot Topic: Fringe
What fringe rate should I use in my estimate, y’all?
First, you may ask, in that slow, southern drawl of yours, what is a freakin’ fringe rate? Are you a cost analyst or a cowboy? You’re such a colorful character that I will fill you in:
The term, “Fringe”, often referred to as overhead* refers to benefits that are additions to compensation that companies give their employees. So when you calculate a fully burdened labor rate, fringe, or overhead, needs to be included in that calculation.
This question as to what rate to use comes up and again and again amongst cost estimating nerds. A common rate to use if you don’t have more information is something called the OMB fringe factor. The last published rate I can find is from 2017. [If you have a more recent guidance from OMB I would love to see it in the comments]
I’ve never been comfortable using a rate that’s more than a few years old, especially given that benefits can change over time. For example, many government agencies are now including paid paternity leave up to six weeks for new fathers. Transportation Secretary Pete Buttigieg being the most infamous recent example. In theory at least this new benefit should impact that fringe factor.
Also a single rate shouldn’t be the same across all branches of government, because different agencies include different benefits. In fact, as we all know, benefits often vary according to employee type or seniority, with longer-term employees often eligible to accrue more vacation days.
Several years ago I worked with a spreadsheet detailing all of the different rates for various components of DHS. It was very specific, detailing each line item accounted, for across components. Keep in mind DHS has very different components and very different employees, including everything from legal staff to border patrol agents.
Within DHS, border patrol agents often were issued vehicles or specialized electronic gear for communications, and there was even a line item for firearms and ammo. However for attorneys and other “white-collar“ office workers, burden components included items such as educational allowance and transit benefits. This is just one example, but I think y’all can see, fringe can vary immensely, even within one agency.
In my most recent search for an updated OMB fringe rate, I came across an interesting DOD memo “The FY 2021 DOD Civilian Personnel Fringe Benefits Rates”
If you don’t have any further guidance, I would suggest the most conservative 46.8% listed in the DOD guidance [As a bonus for my paid subscribers (talking to you, mom!!) in the future I will have more exhaustive guidance/list of resources regarding overhead and fringe].
Can y’all tell I binged “Yellowstone” this week?
*Fringe and overhead are often used interchangeably. There are subtle distinctions, but for our purposes we are referring to the overall “rap“ rate“ used to calculate a fully burdened labor rate.
The Estimator’s Toolbox
PerfectXL
My colleague, Bob Keener, has been helping a customer look at cost estimation tools. during that process he came across a useful tool, PerfectXL. PerfectXL is suite of tools that facilitates quality assurance, audit preparation, and documentation of MS Excel workbooks. Check out this short demo of the tool. If you’d like more info, there is a Coursera course here.
Bob, don’t get a big head just because you are “on the internet.” But show your kids :)
FRED Add-In for Microsoft® Excel®
The Federal Reserve Bank of St. Louis Economic Data (FRED-see what they did there?) Add-In is free software that will significantly reduce the amount of time spent collecting and organizing macroeconomic data. The FRED add-in provides free access to over 810,000 data series from various sources (e.g., BEA, BLS, Census, and OECD) directly through Microsoft Excel. Features include:
One-click instant download of economic time series.
Browse the most popular data and search the FRED database.
Quick and easy data frequency conversion and growth rate calculations.
Instantly refresh and update spreadsheets with newly released data.
Create graphs with NBER recession shading and an auto update feature.
Coming Events & Training Opportunities
Bias: Your Friend or Your Foe? Two Ways Bias is Your Friend, and 5 Ways Bias is Your Foe
Featuring Dan Galorath
Wednesday | February 16, 2022; 10:00am PDT | 1:00pm EDT | 6:00pm UTC
*Not available at this time? Register below and we will send you a recording of the video presentation
We all have biases. Some are harmless (I won't put ketchup on hot dogs… never tried).
When making decisions it is important to identify what our biases are and what we can do to mitigate them. It's also good to recognize when our gut instinct might be more correct than the data.
During this Lunch and Learn session you'll learn:
• The planning fallacy
• Reference class forecasting
• The 5 levels of risk management
• Estimation bias and the value of models and the risks associated with models
Who this is for:
• Cost estimators at all companies
• Budget analysts at all companies
• Project/program managers for commercial projects
• Project/program managers for government projects
• Senior leaders with the government
• If you know of anyone in your department or organization who would benefit from this free learning session, please forward this invitation to them so they can register here.
The Military Operations Research Society (MORS) Cost Analysis Community of Practice (CoP)
The MORS CoP will be hosting a virtual meeting on 24 February 2022 from 1200-1330 hours (ET). Ms. Erica Walters from the Office of the Secretary of Defense Cost Assessment and Program Evaluation (OSD CAPE) will be discussing the latest updates to the OSD CAPE Inflation and Escalation Best Practices for Cost Analysis: Analyst Handbook.
First released in April 2016, the handbook focuses on the differences between inflation and escalation and their importance to cost analysis. It also suggests methods of approaching cost problems in light of the various types of price change. The handbook is intended for the entire Department of Defense (DoD) cost analysis community to include analysts in OSD, the Military Departments, the Office of the Chairman of the Joint Chiefs of Staff and the Joint Staff, the Combatant Commands, Defense Agencies, DoD Field Activities, support contractors, and all other organizational entities within the DoD.
Previous versions of this handbook introduced and justified the need to distinguish between inflation and escalation, and established the definitions of real price change and constant price. The latest version of the handbook expands on previous definitions and adds step-by-step instructions for basic calculations, aiming to increase the practical application of escalation and real price change across the cost estimating community.
This presentation will provide an overview the topics of inflation, escalation, and real price change as well as discuss the most significant changes to the handbook. Participants will have the opportunity to engage Ms. Walters with their comments and questions.
To participate in the meeting, dial in here.
Link: https://www.gotomeet.me/MORSMeeting50b/cost
Phone: +1 (646) 749-3122
Access Code: 682-280-445
If you have any questions, please contact the MORS Cost Analysis CoP Chair, Ms. Emily Foglia, at efoglia@technomics.net.
Podcasts of Interest
When he's not tooling around the National Capital region on his motorcycle, Tom Temin interviews federal executives and government contractors who provide analysis and insight on the many critical issues facing the Executive branch. The Federal Drive is found at FederalNewsNetwork.com and 1500 AM in the Washington D.C. region.
EPA acquisitions leader receives Presidential Rank Award
When it comes to acquisition, Kimberly Patrick has done it all. She used lean management to reduce backlogs and speed up procurements, brought senior agency management into acquisition planning, found innovative ways to meet small business goals. She's the director of Office of Acquisition Solutions, Office of Mission Support at the EPA, and the recent recipient of a Presidential Rank Award. She joined the Federal Drive with Tom Temin for more information.
A big governmentwide telecom contract just can't seem to gain altitude.
On of the weirder federal IT developments of recent years is how slowly agencies are using a governmentwide telecom contract that's supposed to be mandatory. It's the Enterprise Information Solutions multiple-award program operated by the General Services Administration. For some facts and figures, and why this might be happening, the Federal Drive turned to federal sales and marketing consultant Larry Allen.
Career Opportunities
Let me know if you have job listings you’d like me to include in this newsletter. Eventually I will include career listings as a perk for paid subscribers, but for now a promise to buy me a beer the next time we meet will suffice 😊
Makersite combines millions of data points to give you comprehensive knowledge of product impacts and potential improvements across several criteria like cost, risk, supply chain resilience, compliance, environment and health. Check out their latest job listings:
Makersite General careers page
Senior Implementation Engineer - Should Costing
Thanks for checking out The CAMEL. Leave a comment here on Substack or feel free to e-mail us at Tetelestai2021@protonmail.com.
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