In my last blog we considered nine characteristics of a credible cost estimate and identified the ones in which shortfalls were most frequent in my experience as a senior reviewer of Army cost estimates.  In this blog, I will address the clear identification of task, and thoughts to reduce the chance of shortfalls of this characteristic.

Clear identification of task, as described in the March 2009 Government Accountability Office (GAO) Cost Estimating and Assessment Guide. 

  • Estimator must be provided with the system description, ground rules and assumptions, and technical and performance characteristics
  • Estimate's constraints and conditions must be clearly identified to ensure the preparation of a well-documented estimate

In the Department of Defense (DoD), and other agencies who have adopted it, the Cost Analysis Requirements Description (CARD) provides a framework to document these elements of information.  In my experience, cost estimators are typically left with the responsibility to complete the CARD.  That is not necessarily a bad thing since the cost estimator must certainly know these elements of information on which to base the estimate and is likely to have a good sense of what information to seek out from the stakeholders and the risks and cost drivers in the program.  At the same time, these elements of information are not the responsibility of the cost estimator who must, in all cases, maintain objectivity during the cost estimating process.

This leads to my primary point and one that I often made to the Army cost estimating community.  It is imperative to get the “fingerprints of the stakeholders” on the CARD in the beginning of the cost estimating process and obtain their collective final approval.  The stakeholders are usually the user, developer, producer, acquirer, trainer, logistician, personnelist, budgeter, planner and programmer, tester, and the leaders of these functions.  However, I certainly do not wish to leave the impression that the cost estimators should wait on the sidelines until the program is defined by the stakeholders to begin the cost estimate.  Rather, I advocate the early involvement with iterative CARDs and cost estimates.

It is not unusual, especially in the initial phases of a program, for the stakeholders to have different understandings of a program’s characteristics, the program to experience changes in its standing in the acquisition environment, changes in technology, or a host of other circumstances which can affect a program and its cost estimate.  This is not unusual and program characteristics are often fluid until the program settles down.  The cost estimators therefore play a critical role in resolving potential misunderstandings, identifying historical areas of cost risk, uncertainty, and cost drivers, and insuring currency and relevancy of the program’s ground rules and assumptions which, in turn, may change or fine tune the program’s characteristics and in turn engage the stakeholder leadership so they fully understand their stake and interdependencies of the program.

Establishing an iterative coordination process for the CARD is advised for the benefit of both the advocates and distracters of a program.  Being transparent establishes trust and credibility in the cost estimate as it is being developed leading to a final, for the record estimate that will also bear the “fingerprints of the stakeholders”.  I cannot overemphasize the importance of this process that I came to know the hard way.  The cost estimator should defend the cost estimate and never be in the position of defending the program’s characteristics.


About the Blogger:

Bob Young has been with PRICE Systems as an Executive Director since 2004. Before joining PRICE, Bob was a Deputy Assistant Secretary of the Army for Cost and Economics where he was a senior cost advisor to Army leadership on all major Army acquisition, management and operations programs and decisions. He developed Army-wide cost and economic analysis policy. With 34 years of experience, Bob has also held many other Cost & Economic and Financial Management positions within the Army. Bob received several awards during his career recognizing his outstanding service, including the Meritorious Presidential Rank Award in 1996 and 2003, and the Society for Cost Estimating and Analysis (SCEA, now ICEAA) Lifetime Achievement Award in 2001.