Range Estimating (REP)

Prepared by:
Decision Sciences Corp. (DSC)

Prepared for:
Public purchase

Application:
Financial analysis:
Environmental impact analysis: ---
Waste management/P2:
Environmental cost listing/database: ---
Cost estimation: ---
Alternative product/process comparison: ---

Risk analysis tool. The system can consider conventional, hidden, and contingent costs. However, contingent costs do not necessarily include environmental liability costs, and the accuracy of estimates in that regard has not been determined. These cost elements can include non-environmental factors as well. There is no specific guidance provided on how to include or handle environmental cost elements.

Elements of control:
Cost control ---
Resource control ---
Estimating control ---
Schedule control ---
Scope control ---
Risk control

Development date and updates:
Introduced in 1972. The current release of REP is version 4.0, released in1993.

Public availability:
Available

Purpose and current use:
The program was developed as part of a 7-year research effort, which began in 1968 and covered a broad spectrum of industries. REP has users both in the U.S. and abroad. It is used by private industry and government agencies. It has been used for a variety of problems including detailed cost estimating, negotiation, competitive bidding, project management, engineering design, new product evaluations, and research and development.

Cost information:
The current REP for PC licensing fee is $1,715.

System requirements:
REP is available for IBM and compatible PCs. Although the system has been used on a network, it is not designed to be network compatible, and cannot be accessed concurrently by multiple users.

Software summary

Size and complexity of projects:
No limit

Other compatible systems offered:
None

Nonquantifiable information:
None

Range Estimating is a tool for looking at risk and sensitivity of cost estimates. The Monte Carlo Simulation method requires users to identify probability distribution functions for critical elements as well as parameters such as the mean and standard deviation. DSC believes this method can be very difficult to use effectively by inexperienced users. They believe that Range Estimating provides the solution by synergistically combining Monte Carlo simulation, Pareto's law, and DSC-developed heuristics[1] to quantify and rank risks and opportunities for decision making. Range Estimating only requires users to enter a range to identify and quantify risk. By ranking the input elements, it allows users to see why a decision's risk profile looks the way it does. REP can assist users in doing the following.

REP can produce five management reports, a modeling report and four technical reports. The reports are simple and useful for managers (e.g., to estimate contingency, risks associated with each critical element, and the probability of having a cost overrun).

Life cycle stages

Raw material acquisition ---
Manufacturing stage
Use/reuse/maintenance ---
Recycle/waste management ---

The program is not designed to consider more than one life-cycle stage.

Type of costs considered

Conventional
Potentially hidden
Contingent ---
External ---

Any type of positive or negative flow can be analyzed using REP, as long as it can be conceptualized and a probability distribution can be drawn for it. The user's manual discusses the division of all costs into three different types: known, known-unknown, and unknown-unknown. The known elements affect the bottom-line in ways that can be measured. The known-unknown comprise those elements that are known to affect the bottom-line in ways that cannot be measured exactly. These would relate to hidden costs. The unknown-unknown cannot be analyzed, as there is no known methodology to handle them. Although the user's manual discusses all these cost types, there is no specific reference to environmental costs, and the importance of including them into analyses. For example, REP analyzes contingency for detailed and conceptual estimates. These are not necessarily contingent environmental costs, although environmental variables can be factored as critical elements into the analysis. Also, hidden cost elements would include environmental costs only at the user's discretion.

Method of cost estimation

The system is not designed for cost estimation. It is designed to improve on cost estimates by quantifying risk.

Generation of financial indicators

Net present value (NPV)
Payback period ---
Internal rate of return (IRR)
Benefits cost ratio ---
Other ---

Ability to include environmental costs

User friendliness and flexibility

The system does not accept inputs from other software systems, but the manufacturers feel that this increases the productivity of the system by avoiding iatrogenic (induced by the assessor) risk. This happens because software systems often move too much, and the wrong data in the transfer process. This does not involve much extra effort on the part of users because most analyses do not have more than 10 to 20 critical elements. They also believe that the Monte Carlo method for risk analysis, especially when used on spreadsheets by nonstatisticians, can at times grossly understate risk. This happens when users identify too many variables in the spreadsheet. REP, on the other hand, uses Pareto's law to highlight elements that are incorrectly defined as critical by users.

User-support

The price of the program includes one copy of the software, user's guide, 90days telephone support, and 2 years of program updates free of charge. Decision Sciences also offers a seminar that can be arranged at clients' facility at a fee of $1,400. No demonstration disks are offered, to protect the trade secret algorithms contained in REP.

Limitations

The program does not run on Windows but can run on any IBM-compatible computer without the need for a math co-processor or extended memory. DSC does not license its trade-secret heuristics to software developers for incorporation into their programs. Although REP can consider conventional, hidden, and contingent costs, these will not necessarily include environmental factors. DSC provides no specific references or guidance to users on how to include or deal with environmental variables and costs.

Basis for evaluation:
Based on information received from Decision Sciences in February 1995.

Contact information:

Decision Sciences Corporation
Box 28848
St. Louis, MO 63123
314-739-2662
314-536-1001 (FAX)

  1. Heuristics: Relating to or using a problem-solving technique in which the most appropriate solution of several found by alternative methods is selected at successive stages of the program for use in the next step of the program (American Heritage Dictionary, Second College Edition).
Return to the top of this document.

Return to the Chapter 4 Index

Return to the Table of Contents