There are various ways that you can calculate cost savings. You have to first determine if it is a hard, soft, or 3-bid cost savings. The only cost savings that impact your financial statements is the hard cost savings. Hard cost savings is only relevant if you have historical pricing data.
Originally Posted by pledger1
Just curious as to what savings calculators your company utilizes? I know they are several different formulas that are generally accepted, I'm just looking for real examples of what you are currently using.
We are currently using a average of bids. Which means we are combining all of the bids to get an average and then subtracting the low bid from that. It seems like an odd way to calculate savings, but that's what we doing currently.
Bid 1 = $100
Bid 2 = $150
Bid 3 = $125
Avg = $125 minus low bid (100) savings = $25
Any other suggestions?