by Bob Young
| January 8, 2015
Whether a new cost estimator or a seasoned professional cost estimator, we all need to continuously seek to improve the credibility of our cost estimates. I can think of no better reference to assess our cost estimates than the March 2009 Government Accountability Office (GAO) Cost Estimating and Assessment Guide.
The basic characteristics of effective estimating from the guide are listed below, were first published in 1972, and have stood the test of time as the yard stick for measuring the credibility of our cost estimates done for both government and industry.
1. Clear identification of task
2. Broad participation in preparing estimates
3. Availability of valid data
4. Standardized structure for the estimate
5. Provision for program uncertainties
6. Recognition of inflation
7. Recognition of excluded costs
8. Independent review of estimates
9. Revision of estimates for significant program changes
From my perspective as a senior reviewer of cost estimates for the Army, I have seen cost estimates come apart at critical times in the decision making process too often because one or more of these characteristics are not met. While each characteristic is critical to the credibility of the cost estimate, in my experience the most common characteristics found lacking are: clear identification of task, broad participation in preparing estimates, availability of valid data, provision for program uncertainties, and independent review of estimates. Not surprising, these are the characteristics that are most difficult to address.
The takeaway from this blog is to remind ourselves of what it takes to develop a credible estimate and to redouble our efforts especially on those characteristics which are most often lacking in our cost estimating process.
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.