AAOM Handbook

The quantity and pricing estimates for new or significantly changed Activities should, where possible, be based on the most credible reference Activities, pricing information, historical cost data, and/or a first principles estimate. There will be variability in the cost of each occurrence for an Activity, in addition to the probable variability in their frequency and timing. When Activities have both significant cost per occurrence, and a low frequency of occurrence in a forecasting/measurement period, the impact of this variability on the forecast for that period may be substantial. When Activities have a high frequency of occurrence in a forecasting/measurement period the total cost will converge on the product of the frequency and the average cost. Hence low frequency Activities will require an estimate of the distribution of likely cost outcomes while high frequency Activities can use an estimate of the average cost. As actual data becomes available, through feedback to the EPS from the costing information system, the initial estimates of Resource Types, pricing and costs can be refined.

Purpose

To estimate the cost of new/modified OMS Activities.

Quantity

• One set of Resource Types for each new/modified Activity. • One cost estimate for each of the Resource Types for each of the new/modified Activities.

Quality

In identifying the Resource Types for an EPS consider;

• The data available from the costing system(s) of record. • The following generic resource types; o Equipment, o Labour, o Materials, o Spares, o Contract Services & o Utilities.

• The minimum number of Resource Types that can support a reliable forecast for Activity costs and Work Centre demand for each EPS. Note that different Resource Types may be appropriate for different EPS'.

In estimating the price/cost of Activity Resource Types consider;

• Information available from work management, supply and costing systems.

© McAlear Management Consultants 2006

Operational Planning: Set Expenditure Schedule

Updated: August 2018

Page 14