2007 PRICE INSight
PRICE Systems Supporting GAO with Cost Assessment Guide
The U.S. Government Accountability Office (GAO) is nearing completion of a Cost Assessment Guide intended to establish a consistent methodology for use across the federal government for the development and management of program cost estimates. Budget simulations indicate that the nation is facing a large and growing structural deficit in the long term, primarily due to population aging and rising healthcare costs. The Comptroller General has stated, "Continuing on this unsustainable fiscal path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security" (GAO 2005, 1). New budgetary demands and demographic trends will place serious budgetary pressures on federal discretionary spending, as well as on other federal policies and programs, in the coming years.
Faced with this reality, the government must employ effective management practices and processes to financially plan and execute programs. Legislators, government officials, and the public want to know whether government programs are achieving their goals and what their costs are. The capability to generate reliable cost estimates is a critical function necessary to support the Office of Management and Budget's (OMB) capital programming process. Without this capability, agencies are at risk of experiencing cost overruns, missed deadlines, and performance shortfalls. Furthermore, cost increases often mean that the government cannot fund as many programs as intended or deliver them when promised.
The GAO Cost Assessment Guide will be a compilation of best practices used by federal cost estimating organizations and industry to develop and maintain reliable cost estimates throughout the life of a government program. By default, this guide will also serve as a guiding principle for GAO auditors to evaluate the economy, efficiency, and effectiveness of government programs.
The current draft guide contains 20 chapters, including: Characteristics of Credible Cost Estimates and a Reliable Process for Creating Them; The Cost Estimate's Purpose, Scope, and Schedule; Technical Baseline Description; Data; Cost Risk/Uncertainty; Documenting the Estimate; and Managing Costs - Planning, Executing, & Updating. The GAO has assembled a panel of over 100 cost experts from industry, government, and academia to assist in writing the guide. The entire guide is scheduled to begin final review by the panel later in May 2007, followed by public release of an exposure draft on the GAO website in June or July 2007. The guide will remain a draft document for about a year after public exposure, during which time the panel will meet quarterly to refine the document, address comments received from public exposure, and discuss GAO's piloting of the Guide in future audits.
PRICE Systems is proud to support this important GAO project with two members of our company, Bill Mathis and Bruce Fad, serving on the panel.
