Original Post Date: Tuesday, October 12, 2010

When I glanced at the Washington Post on Sunday, the following headline screamed out:

Defense cuts could slow D.C. economy for years

The article basically covers how Defense Secretary Robert M. Gates is calling for reducing spending on "support contractors" by 10 percent each of the next three years as the Defense budget shrinks. As Washington DC is a hub for these types of companies, the impact is expected to be significant. According to the article, more than a quarter of national defense spending contains of outlays for service contracts. Among the largest companies affected are CACI, SAIC, Lockheed-Martin, Booz Allen Hamilton and ManTech.

As the Defense budget shrinks and more companies are chasing fewer projects, the need for greater accuracy in cost estimating increases. At the same time, the WSRA adds 20,000 new positions in cost estimating, contracts and oversight.

This is an interesting conundrum, cutting DoD service contracts 10% over three years while the government is adding 20,000 new positions in cost estimating, contract and oversight

One year after the WSRA was signed into law, an interesting observation from the National Defense Magazine Blog:

Nancy Spruill, director of acquisition resources and analysis at the office of the undersecretary of defense for acquisition, technology and logistics points outs “The long pole in the tent is the cost estimates,” she said. “There's a lot of programs that need cost estimates as they're moving through the process today. … Doing additional ones has been difficult, especially a while ago, when they didn't have the staff.”

Thus, in an era of shrinking defense budgets, greater oversight and more competition for fewer projects, parametric cost estimating models such as TruePlanning can play a major role in providing accurate cost and risk estimates for both government and contractors. This is especially true in Source Selection where determining the most cost-effective offering is critical. For more details on using TruePlanning for Source selection, see my previous two blog posts.

Zach Jasnoff,
Solutions Architect, PRICE Systems