Contingency firms

For preliminary estimates, a 15 to 20 percent project contingency should be applied if the process information is firm. As the quality of the estimate moves to definitive and detailed, the contingency value may be lowered to 10 to 15 percent and 5 to 10 percent, respectively. Ejq)erience has shown that the smaller the dollar value of the project, the higher the contingency should be. 

Biotech licensor Pharma licensee Firm payments Upfront fees Equity R D/yr R D term (years) Contingent equity... 

Contingent business interruption insurance and contingent extra expense insurance protect a firm against interruption and extra expense losses resulting from damage caused by an insured peril to property that it does not own, operate, or control. There are four situations in which this coverage is used When the insured depends... 

F. F. Easton and D. R. Moodie. Pricing and lead time decisions for make-to-order firms with contingent orders. European Journal of Operational Research, 116(2) 305-318, 1999. 

The papers discussed so far assume that once the firm quotes a customer a lead time (and price), the customer immediately makes a decision as to whether to accept or reject the offer. In reality, customers might shop around , i.e., request quotes from multiple firms, and/or need some time to evaluate an offer. Hence, there might be a delay before a customer reaches a decision on whether or not to accept an offer. Easton and Moodie [32] study DDM-P in the face of such contingent orders, which add variability to the shop congestion and hence to the lead time of a new order. In their model, the probability that the customer will accept a quoted price/due-date pair (i ,Z) follows an S-shaped logit model... 

The use of established and defensible estimating techniques. Specifically identify the basis for cost allowances and contingency. Avoid making firm commitments except on a basis of adequate engineering, firm prices from the market-place, and thorough risk analysis. Be critical in the use of data based on previous projects, especially those set up as self-fulfilling prophesies. 

Note also that Table 7.9 indicates that there will be no loss with 21% probability. This information is also valuable to a firm that does not want to spend money for a contingency plan. The intermediate loss values and their probabilities can be used to justify investments for different contingency plans. 

Careful analysis of all the factors included in such a diagram enables the firm to plan a feasible cost reduction programme, which can thereafter be integrated into its overall cost structure to re-establish competitive advantage. Identification of the inter-relationship between factors provides a mechanism to establish contingency plans and reduce political pressures within an organisation. 

Summarizing I contend that the inclusion of embedded lead users inside the boundaries of the firm can be theoretically justified in some cases. It is contingent on the person-organization fit (capabilities and identic view], on the degree to which lead users can be regarded as flrm-spedflc assets (efficiency view), and on the aspired sphere of influence of the firm (power view). 

Yet the ability to empathize with the customer may be contingent on the question, who each individual in the firms regards to be the customer. E.g. embedded lead users may have the ability to empathize especially with external lead users and perceive them to be their customers. Thus, different kinds of use intensity may stimulate different forms of cognitive empathy. This issue merits further investigation. 

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