Benchmarking in Cost Estimation

If you benchmark projects on €/kWp, you miss the point. The real metric is €/MWh. In practice, I keep running into the same discussions: How do you compare Project A (say, in Eastern Europe) with Project B (say, in Southern Europe), when grid, construction, O&M or financing have totally different cost profiles? Instead of arguing over individual cost items, there’s a simpler way: look at LCOE (€/MWh). What really matters (short & clear): --> €/kWp = construction indicator, but not a success factor. --> LCOE (€/MWh) captures CAPEX, OPEX, performance (PR/degradation), financing & lifetime. --> A “more expensive” project can deliver cheaper power thanks to higher yield, longer lifetime, or better financing. --> Investors and banks already benchmark on €/MWh, not €/kWp. Number flavor (utility scale, all-in incl. EPC, development, financing): -->Typical Utility Scale DE/CEE (2024): ~560–600 €/kWp all-in -->Project A: 580 €/kWp, PR 80%, WACC 6%, 25 years -> ~49-52 €/MWh -->Project B: 640 €/kWp, PR 87%, WACC 5%, 30 years -> ~40-43 €/MWh --> Same installed capacity, different assumptions –> output beats input. Do you still benchmark projects on €/kWp? Or already on €/MWh? And which 3 variables move your LCOE the most: PR, WACC, O&M, degradation? #AndreasBach #LCOE #SolarPV #ProjectFinance #CleanEnergy

💰 I spent 160 hours benchmarking ETL workloads (yes, I burned a ton of $$). Here’s what I discovered: 1. Existing benchmarking tools aren’t realistic. 2. Benchmark results don't reflect actual ETL costs. After reading hundreds of pages of TPC specs end-to-end and running them ourselves, it became clear that standard benchmarks fail to represent real-world scenarios - like skewed updates from late-arriving data. Official TPC tools also lack flexibility, making it difficult to adjust the ratio of operations (inserts, updates, deletes) to match your own use cases. For example: - An Observability SaaS startup may have workloads that are 95% append-only. - A Fintech company may have workloads with 70% updates targeting recent partitions (e.g., transaction status changes). A "one-size-fits-all" benchmark just won't capture the true costs companies face. That’s why we've: ✅ Analyzed existing tools and real-world ETL workloads all the way - https://lnkd.in/gAciKPn9 ✅ Built a new open-source benchmarking tool - https://lnkd.in/g6-zp-XW ✅ Built a calculator based on realistic workload patterns to estimate your organization's total cost of ownership on popular platforms. Check it out at https://lnkd.in/gAciKPn9. I understand that there's no such thing as an "objective" benchmark, especially given the complexity of configurations across different engines and table formats. So, if you spot gaps or have suggestions, feel free to contribute to Lake Loader.

Zero-Based Costing in Procurement — A Practical Approach to Sustainable Savings In today’s competitive manufacturing environment, traditional cost benchmarking often falls short. Simply comparing vendor quotations or last year’s prices doesn’t reflect true cost competitiveness. That’s where Zero-Based Costing (ZBC) makes the difference. Instead of relying on historical data, ZBC builds the cost from the ground up — each element is justified based on actual material, process, and value addition. Let’s look at a practical example from gear blank procurement 👇 When sourcing a machined gear blank, the process involves multiple cost elements: Raw material (e.g., EN19 steel bar or billet) Forging cost (heating, forging, trimming, and normalizing) CNC turning and facing Inspection, handling, and logistics Using Zero-Based Costing, the purchase team breaks down and analyses: 1️⃣ Raw Material Cost: Calculate based on billet weight, material yield, and market price per kg. 2️⃣ Forging Cost: Derive from press tonnage, cycle time, and energy consumption. 3️⃣ Machining Cost: Based on cutting time per part, tool cost, and machine-hour rate. 4️⃣ Overheads & Margin: Added logically, not arbitrarily. This approach helps identify cost-drivers and inefficiencies — for instance, discovering that a supplier’s forging yield was 68% while the industry norm is 80%. By collaboratively improving the process and material planning, we achieved a 12% cost reduction without compromising quality. Zero-Based Costing is not just a pricing exercise — it’s a strategic tool that fosters transparency, strengthens supplier relationships, and ensures sustainable savings. 💡 Takeaway: True cost optimization starts when we understand what every rupee in the part price really stands for.

Price transparency data is being underutilized. A new report from PBGH shows how employers can turn the data into commercial benchmarks that can support fiduciary decisions. --- The Purchaser Business Group on Health (PBGH)'s new report proves that the price transparency data IS viable as a commercial benchmark option when used the right way. Though, the results may not be pretty. When employers combine Transparency in Coverage (TiC) and Hospital Price Transparency (HPT) data with their own claims, they unlock the proof they've been looking for. Proof of (relative) overpayments, proof of price inconsistencies, and generally proof of the failure by vendors to negotiate competitive rates compared to competitors in the same area. --- PBGH’s analysis showed that: -Rates for the same procedure vary by over 100% across plans, even within the same hospital. -Higher prices do not equal better quality. Some of the lowest-cost providers delivered the best outcomes (see attached image for some examples). -Discounts off of billed charges are not enough. #Employers need actual price data to assess whether they’re being overcharged (exactly like in pharmacy). Price #transparency gives employers a tool to compare across markets, challenge carriers, and design networks around value. You can also listen to a discussion about this report between Elizabeth Mitchell and Stacey Richter on the Relentless Health Value Podcast just released this morning! --- The report mentions several employers that are already using this data for benchmarking. Boeing, Qualcomm, Costco, city and county of Denver, and other large self-funded employers are using this data to demand accountability from TPAs and identify opportunities for direct contracting. Price transparency may be a compliance requirement, but it can also support your fiduciary role. The data is out there now. How are you using transparency data to benchmark value and hold your vendors accountable?

Different Types of Cost Estimation Tools & Techniques : 💡 Ever wondered why two suppliers quote completely different prices for the same part? 👉 The answer lies in how we estimate cost. In the world of Cost Engineering, understanding the right Cost Estimation Tools & Techniques makes the difference between price guessing and fact-based costing. Over the years, I’ve explored multiple methods - from traditional spreadsheets to AI-driven cost models - and here’s a structured overview that every engineer, sourcing professional, and value analyst should know 👇 Cost estimation means predicting the true cost of a product, process, or project - by analyzing materials, labor, overheads, and profit. 💡 Why Cost Estimation Matters The goal? To bring cost transparency, control, and continuous improvement to every stage of product development. Having the right Cost Estimation Tools & Techniques helps teams make informed, data-driven decisions 👇 🔹 Should Costing (SC) – Breaks down cost by material, labor, and overheads. 👉 Purpose: Helps in supplier negotiations and identifies cost reduction opportunities. 🔹 Zero-Based Costing (ZBC) – Justifies every cost from the ground up, starting at zero. 👉 Purpose: Eliminates unnecessary expenses and focuses on essentials. 🔹 Activity-Based Costing (ABC) – Allocates indirect costs based on activities. 👉 Purpose: Highlights high-cost areas for precise cost control. 🔹 Best-in-Class Costing (BIC) – Benchmarks against industry best practices. 👉 Purpose: Closes cost gaps and boosts efficiency. 🔹 Target-Based Costing (TBC) – Aligns design and production cost with target market price. 👉 Purpose: Ensures profitability while meeting customer expectations. 🔹 Kaizen Costing – Drives gradual and continuous cost reduction. 👉 Purpose: Improves productivity and reduces waste over time. 🔹 Lean Costing – Integrates Lean principles to eliminate waste and enhance efficiency. 👉 Purpose: Enables continuous cost reduction through process optimization. 🔹 Benchmark Costing – Compares with global competitors to set cost targets. 👉 Purpose: Identifies regional or supplier-specific cost advantages. 🔹 Parametric Costing – Uses mathematical models to estimate cost. 👉 Purpose: Perfect for early-stage estimates during new product development. 🔹 Product Costing (PC) - Calculates total cost across the product lifecycle. 👉 Purpose: Provides a detailed view of cost distribution and lifecycle value. 🚀 Final Thought Each method serves a unique purpose - but together, they build one powerful outcome: Cost Transparency ➜ Profitability ➜ Sustainable Value. 💬 Which of these cost estimation techniques do you use most in your organization? Let’s exchange ideas and strengthen our global cost engineering community 👇 Join the following WhatsApp group for further learning. Should Costing Community 2 https://lnkd.in/gSiE-fxy ...more #CostEngineering #ShouldCosting

Best Practice in Benchmarking issued by the UK Infrastructure and Projects Authority (IPA), provides a comprehensive #framework for applying benchmarking to major #infrastructure projects. It outlines a structured seven-step methodology for comparing project costs, carbon impacts, and #performance metrics against data from similar projects to improve #decision_making , ensure value for money, and support the UK government’s strategic goals, including its net zero commitment. The guidance emphasizes early-stage benchmarking, consistent data collection, and collaboration between government and industry, offering practical tools, case studies, and best practices to enhance project #planning , delivery, and #performance_monitoring throughout the lifecycle. #benchmarking #benchmark #decisionmaking

Should-cost methodology is emerging as one of the most reliable solutions to help #upstream players address their current challenges, providing the granular cost transparency needed to deal with the changing landscape. So how does it work? After breaking down the total cost of a project, product, or service into granular components and assessing the #cost drivers for each, companies can determine the reasonable should-cost of a service or product based on its constituent elements. Compared to traditional solutions (which limit the benchmark to a finite number of past projects), should-cost can estimate the costs associated with any combination of design, geographic footprint, and commercial agreement. Initially developed, fine-tuned, and deployed at scale in the automotive sector, the #shouldcost methodology uses bottom-up modeling of all supply chain costs through a four-step approach: ➡️Step 1: Analyzing the design choices and 2D or 3D drawings of the project to derive a bill of quantities for raw and bulk materials. ➡️Step 2: Mapping the end-to-end value chain to identify all the manufacturing steps required to produce each component. ➡️Step 3: Costing the required quantities and value chains to calculate direct costs, leveraging proprietary databases and productivity models tailored to each country, technology, and sector. ➡️Step 4: Completing the bottom-up should-cost calculations to define should-cost components, including all elements of suppliers’ cost structures. Through its flexible, unbiased, and fact-based methodology, a should-cost analysis can, therefore, provide up-to-date, end-to-end transparency on the entire supply chain cost structure for an upstream project’s tenancy in common (TIC) investment. To illustrate, we performed a deep dive should-cost analysis for #LNG tanks, providing full transparency on key cost drivers for further negotiation with the supplier. This analysis enabled a fact-based negotiation with the supplier and led to an 8% cost reduction on the final negotiated price compared to the initial bid. #capitalexcellence #mckinsey #lngtanks #oilandgas #procurement #projectmanagement #labor #materials