Date of Award
Master of Science
Department of Systems Engineering and Management
Edward D. White III, PhD
Engineering Change Orders (ECO) are technical requirements changes to existing contracts. To account for the potential increase in contract costs stemming from ECOs, current acquisition practice is to estimate a dollar value to hold in management reserve (MR) in case of ECO occurrence. Estimators often rely on rules-of-thumb when developing these estimates. Specifically, estimators use a 10% rule-of-thumb for estimating MR contract costs in the Development life cycle phase and a 5% rule-of-thumb for contracts in the Production or O&S life cycle phase. However, no empirical data supports or validates these 10% and 5% figures. Using a new data source, 2,434 contracts with ECOs were analyzed to determine the accuracy of the 10% and 5% rules-of-thumb as well as to determine if more accurate rules-of-thumb could be developed. Results suggest that if a contract is likely to have a positive ECO percentage, then 13.25%, 5.5%, and 13.5% rules-of-thumb are more appropriate for contracts in the Development, Production, and O&S life cycle phases respectively. Service, Contract Type, Commodity, Initial Program Size, and Schedule impact ECO percentages.
DTIC Accession Number
Miller, Kaiana M., "Investigation into Engineering Change Order Costs and Appropriate Rules-of-thumb" (2022). Theses and Dissertations. 5416.