A cost estimate is not considered valid until management has approved it. Since many cost estimates are developed to support a budget request or make a decision between competing alternatives, it is vital that management is briefed on how the estimate was developed, including risks associated with the underlying data and methods. Therefore, the cost estimator should prepare a briefing for management with enough detail to easily defend the estimate by showing how it is accurate, complete, and high in quality. The briefing should present the documented Life-Cycle Cost Estimate (LCCE) with an explanation of the program’s technical and program baseline.

For more information see: GAO Cost Estimating and Assessment Guide – Chapter 17

The briefing should be clear and complete, making it easy for those unfamiliar with the estimate to comprehend its level of competence. The briefing should focus on illustrating to management, in a logical manner, what the largest cost drivers are. Slides with visuals should be available to answer more probing questions. A best practice is to present the briefing in a consistent format to facilitate management’s understanding the completeness of the cost estimate, as well as its quality.

The cost estimate briefing should succinctly illustrate key points that center on the main cost drivers and the final cost estimate’s outcome. Communicating results simply and clearly engenders management confidence in the ground rules, methods, and results and in the process that was followed to develop the estimate. The presentation must include program and technical information specific to the program, along with displays of budget implications, contractor staffing levels, and industrial base considerations, to name a few.

These items should be included in the briefing: [1]

• The title page, briefing date, and the name of the person being briefed.
• A top-level outline.
• The estimate’s purpose: why it was developed and what approval is needed.
• A brief program overview: its physical and performance characteristics and acquisition strategy, sufficient to understand its technical foundation and objectives.
• Estimating ground rules and assumptions.
• Life-cycle cost estimate: time-phased in constant-year dollars and tracked to any previous estimate.
• For each Work Breakdown Structure (WBS) cost element, show the estimating method for cost drivers and high-value items; show a breakout of cost elements and their percentage of the total cost estimate to identify key cost drivers.
• Sensitivity analysis, interpreting results carefully if there is a high degree of sensitivity.
• Discussion of risk and uncertainty analysis:
  • cost drivers, the magnitude of outside influences, contingencies, and the confidence interval surrounding the point estimate and the corresponding S curve showing the range within which the actual estimate should fall;
  • other historic data for reality checks; and
  • how uncertainty, bounds, and distributions were defined.
• Comparison to an independent cost estimate, explaining differences and discussing results.
• Comparison of the LCCE, expressed in current-year dollars, to the funding profile, including contingency reserve based on the risk analysis and any budget shortfall and its effect.
• Concerns or challenges the audience should be aware of. Conclusions, recommendations, and associated level of confidence in the estimate.

Tasks that need to be accomplished during this step include: [1]

• Develop a briefing that presents the documented life-cycle cost estimate;
• Compare the estimate to an Independent Cost Estimate (ICE) and explain any differences;
• Compare the estimate (Life-Cycle Cost Estimate (LCCE)) or independent cost estimate to the budget with enough detail to easily defend it by showing how it is accurate, complete, and high in quality;
• Focus in a logical manner on the largest cost elements and cost drivers;
• Make the content clear and complete so that those who are unfamiliar with it can easily comprehend the competence that underlies the estimate results;
• Make backup slides available for more probing questions;
• Act on and document feedback from management;
• Request acceptance of the estimate

AcqLinks and References:

• Defense Acquisition Guidebook (DAG) – Chapter 3
• GAO Cost Estimating and Assessment Guide – Chapter 17
• NASA Cost Estimating Handbook – 2008
• DoD 5000.04-M, “DoD Cost Analysis Guidance and Procedures” – Dec 1992
• DoD Directive 5000.04 “DoD Cost Analysis Improvement Group (CAIG)” – 16 Aug 06
• 10 USC Sec. 2434 “Independent cost estimates; operational manpower requirements”
• Website: CAIG Operating and Support Cost-Estimating Guide
• Website: OSD Director of Cost Assessment and Program Evaluation (DCAPE)

Updated: 7/29/2017