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News Release

Aug 4, 2009

Auriga introduces Risk-Reward pricing for increased flexibility

Apart from two traditional approaches to pricing - Fixed Price and Time&Material (T&M) models – Auriga now offers Risk Reward approach to those clients who want to combine maximum risk mitigation and reasonable pricing. One of the key components of pre-sale activities of all outsourcing contracts is a balanced selection of a pricing model which makes a project or a contract beneficial both for the client and the contractor.

Auriga introduces a new approach, where the selection process is supported by Auriga CPPM (Choose Project Pricing Model Tool) – a specially designed tool to assist in choosing and offering pricing options from three main pricing models – T&M, Fixed Price and Risk-Reward.

Understanding that realistic and sound project estimation is a basis for reaching the project goals, we are enhancing our estimation methodology – replacing an interval approach to project estimation with a more advanced probabilistic project profile calculation. As before, based on PERT-analysis, the estimator comes up with a range estimate of project efforts. The estimator derives a list of project risks using the corporate process performance baseline (PPB) of key risk profiles. A risk calculator tool integrated in CPPM allows the estimator to perform Monte-Carlo simulation of project risks and riskless project profile and calculate the total probabilistic project profile.

The total project profile is used in the preparation of a CPPM-based financial proposal. The estimator specifies and adjusts CPPM input data (rates, SG&A, Net profit, setup costs, etc.). As a result, CPPM shows project financial indicators – particularly, success probability of each project model - and draws a plot of an optimal for the client pricing model. After revising project commitments and schedule, pricing options are offered to the client.

This new approach adds flexibility to our pricing proposals giving a wider range of options to choose from for our clients.

Hereinafter we offer a diagram as an illustrative quota:


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