Documentation provides total recall of the estimate’s detail so that it can be replicated by someone other than those who prepared it. It also serves as a reference to support future estimates. Documenting the cost estimate makes available a written justification showing how it was developed and aiding in updating it as key assumptions change and more information becomes available.
For more information see: GAO Cost Estimating and Assessment Guide – Chapter 16
Cost Estimates should be documented to show all parameters, assumptions, descriptions, methods, and calculations used to develop a cost estimate. A best practice is to use both a narrative and cost tables to describe the basis for the estimate, with a focus on the methods and calculations used to derive the estimate. With this standard approach, the documentation provides a clear understanding of how the cost estimate was constructed. Moreover, cost estimate documentation should explain why particular methods and data sets were chosen and why these choices are reasonable. It should also reveal the pros and cons of each method selected. Finally, there should be enough detail so that the documentation serves as an audit trail of backup data, methods, and results, allowing for clear tracking of a program’s costs as it moves through its various life-cycle phases.
Tasks that have to be accomplished in this step include: 
- Document all steps used to develop the estimate so that a cost analyst unfamiliar with the program can recreate it quickly and produce the same result;
- Document the purpose of the estimate, the team that prepared it, and who approved the estimate and on what date;
- Describe the program, its schedule, and the technical baseline used to create the estimate;
- Present the program’s time-phased Life-Cycle Cost (LCC);
- Discuss all ground rules and assumptions;
- Include auditable and traceable data sources for each cost element and document for all data sources how the data were normalized;
- Describe in detail the estimating methodology and rationale used to derive each Work Breakdown Structure (WBS) element’s cost (prefer more detail over less);
- Describe the results of the risk, uncertainty, and sensitivity analyses and whether any contingency funds were identified;
- Document how the estimate compares to the funding profile;
- Track how this estimate compares to any previous estimates.
Two important criteria should be kept in mind when generating high-quality cost estimate documentation. These are:
- It should describe the cost estimating process, data sources, and methods and should be clearly detailed to allow anyone to easily reconstruct the estimate.
- The results of the estimating process should be presented in a format that makes it easy to prepare reports and briefings to upper management.
Typical Outline of a Cost Estimate
I. Cover Page
II. Table of Content
III. Executive Summary
V. System Description
VI. Program Inputs
VII. Estimating Data and data by WBS element
VIII. Sensitivity Analysis
IX. Risk and Uncertainty Analysis
X. Management Approval
XI. Updates Reflecting Actual Costs and Changes
AcqLinks and References:
- Defense Acquisition Guidebook (DAG) – Chapter 3
- GAO Cost Estimating and Assessment Guide – Chapter 16
- 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)