Bill Taylor, vice-president of engineering for Hawthorne Construction, was working away in his office when Jacko McGuire, vice-president of sales of the company, came in to see him. The following conversation took place:
Jacko: Bill, you know that contract for the new office complex in the East End?
Bill: Yes, I do. I was deeply involved in the estimating of the costs for that project, as it is one of the most expensive bids that the company has considered.
Jacko: I know you were, and my team and I are trying to come up with the final price for the bid.
Bill: How has that been going? I've heard rumours that there is some disagreement about the risks involved.
Jacko: Yes, it seems that the finance team is concerned that the fixed costs appear to be very high and will only be covered if we are successful in landing the second phase of the project.
Bill: Yes, I recall that that was a major point of contention when we were involved in the
costing process.
Jacko: Well, I'm certain that if we win phase one, we'll be a shoo-in for phases two, three, and four. With all four phases, we will be spectacularly profitable and the initial fixed costs will give us a huge advantage, but I can't get them to see it my way. They believe that the risks are too great because of the initial investment.
Bill: I can see their concern.
Jacko: When you were involved in the initial costing, I recall that the determination of the fixed costs was subject to some estimation on the part of your engineering team. Is that right?
Bill: Yes, it is. Like all estimation processes, especially on major contracts that run for several years, it is often difficult to estimate precisely the relationship between fixed and variable costs. Unfortunately, once fixed costs are incurred, you cannot get them back, while variable costs will only be incurred if the project continues forward into the future.
Jacko: That's what I thought. If you were to revisit the costing of the project, is it possible that a new estimate could be developed that showed the fixed costs as much lower, while variable costs were much higher? In this way, the analysts would be satisfied about the risks and we could prepare a bid that is sure to win.
Bill: But nothing has changed from our original estimates, so what's the issue?
Jacko: Bill, I'm not asking you to change the total estimated cost of the project, so everything would be very truthfully done. Just change your estimate of how much of the total cost is fixed and how much is variable.
Bill: I'm not sure I can do that, because there is far greater risk associated with incurring fixed costs rather than variable costs, and the decision would be based on assumptions that I believe are incorrect.
Jacko: But we would win the business and it would sustain us for many years to come.

Required:
What should Bill do? Elaborate on your answer to fully explain your reasoning.