The PowerAdvocate Should-
Cost Assessment gives you robust market intelligence about the true current costs of equipment and components that are
recalibrated to reflect today’s softer market for commodities.
1. EQUIPMENT PRICES LAG BEHIND COMMODITY PRICES SWINGS
Today’s economic climate is creating exciting opportunities for forward-thinking energy
producers and distributors. Despite our current upheaval, the long-term demand for energy
infrastructure continues to grow. Hundreds of billions of dollars in investments will be
needed to meet the U.S. demand for the next 15 years.
And in today’s commodity markets, volatile price swings are creating opportunities for
savvy buyers to capitalize on prices that have fallen anywhere from 20–60 percent in the
past several months. Market pricing is not reflecting this shift and therefore, buyers are not
necessarily getting fair prices on purchases.
Delays in infrastructure projects — because of financing challenges or credit issues — could
lead to price escalation when the economy (and, of course, underlying commodity prices)
begin to rebound. To capitalize on this short-term window, you need insightful market
visibility into the true nature of the costs of your planned capital purchases to identify,
quantify, and evaluate your opportunities to achieve a better cost position.
SHOULD-COST ASSESSMENT
Identifying Cost Structure Independent of Pricing
Industry Intelligence • Innovative Technology • Expert Solutions
2. In a volatile market, historical pricing data and trends offer little value. Before you initiate million- or billion-dollar capital
investments in energy facilities, make sure you are fully informed with up-to-date cost information. The PowerAdvocate Should-
Cost Assessment gives you robust market intelligence about the true current costs of equipment and components that are
recalibrated to reflect today’s softer market for commodities. With greater visibility into current market conditions and a specific
item’s underlying cost drivers, you have the information and insight you need to know what an item “should cost” — and why.
The Should-Cost Process PowerAdvocate’s Intelligence products provide the data
and visibility needed to determine Should-Cost pricing to capture market opportunities
Trust but Verify
Spend and Cost Intelligence tools
identify specific sub-components to
determine the Should-Cost opportunity
Market Price
Should-Cost Price
Adjusted for market
conditions and
material components
Cost Indices tracks both commodity
prices and demand impacting energy
infrastructure equipment pricing
Should-Cost assesses both the quantitative factors
applying the Should-Cost calculator and qualitative
factors using Market Intelligence to optimize savings
Demand
Commodity Prices
Commodity Costs
Demand Impact
Electrical Equip. Manufacturing
Fabricated Metal Parts
Lubricating Oils and Greases
Machinery Manufacturing
General Freight Trucking
Market Intelligence Should-Cost CalculatorCost Indices Spend Intelligence
Commodity prices have fallen anywhere
from 20–60 percent. What’s the impact
on your capital-purchasing plans?
3. ACCELERATE THE SPEND AND COST REDUCTION
Without changing your procurement processes, the Should-Cost
Assessment analyzes relevant cost components and an item’s
associated demand factor to determine the appropriate cost for
equipment and services. Should-Cost integrates quantitative
cost intelligence with qualitative market analysis and negotiation
strategies to make better informed decisions to accelerate and
expand your capital construction plans and O&M purchases.
The service encompasses several steps and milestones:
• Information Collection — We aggregate relevant category
information and integrate our market intelligence and market
trends to form the baseline objectives for the assessment.
• Customized Cost Modeling — PowerAdvocate’s Cost Indices
tool applies cost modeling and customizes the cost drivers to
meet your unique requirements and cost structures for any
technical specifications. We increase accuracy by monitoring
more than 8,000 indices and constantly updating the cost
drivers of more than 740 items. That enables you to verify
the contribution of key commodities to the equipment or
service you are buying.
• Component Indexing — We evaluate your options for locking
in future contracts to hedge the difference in component
prices (raw materials) with the premiums associated with
future contracts. Our Should-Cost Assessment determines
the savings opportunities with long-term contracts.
• Quantitative Analysis — Drawing on our thorough
knowledge of cost modeling for each category as well as
tight commodity forecasts, our Should-Cost Calculator
translates price movements into meaningful and measurable
savings. We help answer the key questions: What should
that equipment cost today? And what will it cost over the
next three to 60 months?
• Market Assessment — PowerAdvocate analyzes the influence
of current and projected demand to identify price elasticities.
We account for numerous variables, including existing
contract spend, regional considerations, supplier pricing
power, benchmark data, current market conditions, current
production capacity, expected global demand, delivery
schedules, logistics, previous performance, and more.
• Negotiation Strategy — PowerAdvocate brings all of the data
together and helps you apply it in the most important ways:
strengthening your negotiating positions and determining
your maximum acceptable contract price. We collect,
review, and analyze your current spend and contracts,
benchmark your data, develop accurate cost models,
develop appropriate price points/breaks, and highlight the
opportunities available to you.
The time to act — to achieve these significant savings in capital
investments — is NOW, while equipment pricing continue to
lag commodity prices. Cost modeling is imperative for your
capital investments and PowerAdvocate has the products and
capabilities to expedite the process of discovering true costs.
For more information on PowerAdvocate Should-Cost
Assessment, please visit www.should-cost.com
(or www.poweradvocate.com).
Wind Turbines
Distribution Transformers
EHV Transformers
Cable
Conductor
Heat Exchangers
Steel Monopoles
Wood Poles
MARKET IMPACT
FROM PEAK
MARKET
OPPORTUNITIES
EXPECTED OVER THE
NEXT 12 MONTHS
5–12%
4–13%
0–4%
8–18%
10–25%
4–8%
5–15%
6–12%
Demand Supply
PowerAdvocate’s Should-Cost Analysis Based on market
conditions and material components, these identified categories
have fallen from their peak pricing
What are the uses for Should-Cost?
• Independent Bid Analysis
• Strategic Negotiation
• Contract Indexing
• Capital Project Planning
• Commodity Exposure
• Cost Estimation Validation
