Likelihood and cost impact of engineering change requirements for DoD contracts

Purpose There appears to be no empirical-based method in the literature for estimating if an engineering change proposal (ECP) will occur or the dollar amount incurred. This paper aims to present an empirically based approach to address this shortfall. Design/methodology/approach Using the cost assessment data enterprise database, 533 contracts were randomly selected via a stratified sampling plan to build two regression models: one to predict the likelihood of a contract experiencing an ECP and the other to determine the expected median per cent increase in baseline contract cost if an ECP was likely. Both models adopted a stepwise approach. A validation set was placed aside prior to any model building. Findings Not every contract incurs an ECP; approximately 80 per cent of the contracts in the database did not have an ECP. The likelihood of an ECP and the additional amount incurred appears to be statistically independent of acquisition phase, branch of service, commodity, contract type or any other factor except for the basic contract amount and the number of contract line item numbers; both of these later variables equally affected the contract percentage increase because of an ECP. The combined model overall bested current anecdotal approaches to ECP withhold. Originality/value This paper both serves as a published reference point for ECP withholds in the archival forum and presents an empirically based method for determining per cent ECP withhold to use.