Internet Exercise #1
Because the Department of Transportation 1996 Appropriations Act exempted the Federal Aviation Administration (FAA) from various Federal procurement laws, the FAA developed and then implemented its own acquisition management system. The official record of its Acquisition Management System (AMS) is known as FAST, which stands for the FAA Acquisition Systems Toolkit. To guide its analysts as they review cost estimates to ensure they are fair and reasonable, FAST includes a Pricing Handbook. That Pricing Handbook includes guidance on direct labor cost estimates. Access the guidance that covers direct labor (follow the steps listed below) as follows.

Steps to access the Direct Labor section of the Pricing Handbook:

• Start with the FAA's website at www.faa.gov


• Scroll over the Regulations and Policies tab and click on the Acquisition Guidance link


• Click on the Index link (at the top of the page)


• Scroll down and click on the Pricing Handbook link (the page will open in a new window)


• Scroll down and click on the 7. Direct Labor link (you will find it under the PART III: COST ANALYSIS heading)

After reading this section of the Pricing Handbook, answer the following questions:

1. What method should be used in situations where detailed drawings, bills of material, and firm specifications are not readily available? When would it be inappropriate for a contractor to use this method?


2. What is an efficiency factor? How is the efficiency factor determined with regards to direct labor?


3. What is a realization factor? How is it determined with regards to direct labor?


4. Will a contractor normally use both factors (i.e., efficiency and realization) when estimating direct labor costs?


5. When the first few units are produced by the contractor, what are the levels of efficiency and realization that should be expected?


6. One of the most difficult tasks performed by FAA analysts is the assessment of projected direct labor rates. What is a projected labor rate?


7. What are the various internal and external forces that can cause projected labor rates to change?

Internet Exercise #2
Perform an Internet search using the term, standard costs, and locate an article (less than one year old) from the results of your search. (Make sure that you do not select an instructor's lecture notes or a class assignment from the results of your search.) After reading the article, write a brief paper (3 – 5 paragraphs) that summarizes and comments on the article. (Your paper should provide the appropriate citation(s). If necessary, you may wish to refer to the following website, which includes information about citations: http://www.cod.edu/library/research/citenet.htm.)