Should-Cost Modelling

Petroleum Development Oman (PDO) is the foremost exploration and production company in the Sultanate. PDO accounts for more than 70% of the country's crude oil production and nearly all of its natural gas supply. PDO engaged Charles Kendall Australia (CKA) to develop several should-cost models for complex areas of spend. Should-cost models are tools that provide a clear understanding of the specific economics behind manufacturing a particular product or service. Benefits range from improving efficiencies and delivering substantial costs savings (without cutting back on scope, quality, capabilities or suppliers’ profits), to improved supplier relationships.

The Challenge

Our Approach

Outcome

The deliverables included:

The models provided PDO with in-depth insights into the cost structure of the services in scope and target pricing for those services which allowed PDO to enter into fact-based contractor negotiations.